Numerous cryptocurrency collapses have taken place since the birth of Bitcoin in 2009, some of which have destroyed certain altcoins. Not many investors are aware of the crashes since they occurred in less popular types of cryptocurrency or without widespread media attention.
Despite the losses, though, Bitcoin, which serves as the de facto standard for cryptocurrencies, hasn’t seen any protracted bear markets.
When the price of important cryptocurrencies, such as Bitcoin, has fallen by at least 20% from recent highs and is continually falling, it is said to be a bear market for cryptocurrencies. A crypto bull market, on the other hand, is one in which the value of the main cryptocurrencies is increasing.
Bitcoin fell from about $20,000 per coin to a little over $3,200 in a couple of days in December 2017, becoming one of the most well-known crypto collapses. Following that, it skyrocketed, reaching more than $65,000 per coin in April 2021 before plummeting below $32,000 in May.
Why Is It Called a Bear Market?
The phrases bull and bear markets are derived from stock trading, and according to some stories, they derive from the attack method of each animal – a bull would rush with its horns pointed skyward. A bear, on the other hand, towering over and swipes down its opponents.
The Parallels Between Cryptocurrency and Stock Bull and Bear Markets
Investors are unfamiliar with the performance of bitcoin amid a stock market downturn. The last genuine, continuous stock market downturn happened between 2007 and 2009. Bitcoin had just been debuted and was getting interested, though not yet accepted.
While determining whether a market is in a bull or bear market in stocks or cryptocurrencies needs a technical study of values, there are numerous other factors that both markets share:
- Volatility
Both equities and cryptocurrencies experience value fluctuations over time, but cryptocurrencies are more susceptible to them because of market liquidity restrictions and a less developed derivatives market.
- Trader Sentiment
A bear market may be predicted in both the stock market and the cryptocurrency market by negative trading sentiment. However, in both situations, contrarian traders can view market declines as a chance to purchase cryptocurrencies at a bargain.
- Outside Influences
Bear markets in stocks and cryptocurrencies can be a reflection of outside circumstances that alter how investors value a certain asset. These variables may include the size of the economy generally, interest rates, or geopolitical variables.
What Are the Signs of a Crypto Bear Market?
The phrase “buy low, sell high” is one of the most well-known in all of investing. It is, in four words, how investors profit. And because of this, recognizing when a bear market is approaching or is about to finish may be quite important for cryptocurrency investors.
This is where things become challenging due to the relatively young of the cryptocurrency sector. Economists, analysts, and traders may search through decades, if not centuries, of stock market data to discover the patterns and events that occurred shortly before a bear market transformed into a bull market and vice versa. Contrarily, Bitcoin was introduced in 2009.
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