update 19 August 2021

A Comprehensive Guide on Crypto Bear And Bull Markets

If you are new to investing in the crypto market, then you’ve likely heard people talking about crypto bull/bear markets or crypto whales, but you might not be sure what they mean.

The truth is that it’s possible to make money in both bull and bear markets, but there are different strategies for each. That said, investors should be cautious when putting their money into cryptocurrency markets no matter what type of investing environment we are experiencing because there are serious pitfalls to avoid.

In this guide, we’ll go over precisely what bears and bulls mean for your investments and examine some strategies that you can use in both markets.

The Bears

When we talk about a cryptocurrency bear market, we refer to a market situation defined by caution and pessimism during which traders are much more likely to sell than buy.

An excellent example of this is Bitcoin‘s downturn in 2018. At the beginning of 2018, BTC prices started plummeting, which considerably shook buyer confidence. After prices began to fall, investors holding BTC panicked and sold their investments, putting a great deal of pressure on the market as a whole.

While owning a losing investment can make anyone depressed, it does present an exciting opportunity. Bearish crypto markets tend to reduce the prices of every project since they all follow BTC very closely.

This means that investors who are willing to wait out this depression could find themselves in a perfect position when the bear cycle decides to recede. For value investors, crashing cryptomarkets can present a brilliant opportunity.

However, investors looking to take advantage of these prices should spend a good deal of time researching their chosen digital assets. If you can find a decent deal on a token or coin that you think has a substantial project and use case, then you have an excellent chance to establish a position that you otherwise wouldn’t have had access to in different market conditions.

As an investor, it’s vital not to mix up a bear market with a price correction in the charts. A bear market is a sustained period characterized by noticeable downward movements. A price correction takes place when the price of an overvalued digital currency corrects itself.

Bull Markets

Typically a bull market is one defined by optimism and investor confidence. If the market trend is up, then we’re witnessing a bull market.

Cryptocurrency investors experienced this toward the end of 2017, and they saw many of their investments skyrocketing overnight. A lot of new money entered the cryptocurrency space, and that pumped a ton of money into many projects.

The massive gains brought about this interest bitcoin experienced, attracting the mainstream media’s attention and dragging in those who had never heard of or at least had never been interested in cryptocurrency before.

Investors who are coming into space during a bull run should be extremely cautious. What goes up must come down, and it’s easy to buy in at the top when the bulls are running. While this can feel like a great decision at the time, you could be setting yourself up for a disaster a couple of months down the road.

When choosing your investments, you should carefully analyze each asset to ensure it is not trading at an inflated and unstable price.

Preparing Your Crypto Portfolio For a Bear Market

If it seems that everything is crashing down in the markets and you’re afraid that a bear market may be imminent, then it may be in your best interest to reduce many of your positions. Positions in less proven digital currencies may especially then be highly inflated. That said, even top coins like Bitcoin and Ethereum can experience massive losses in bear markets.

Your best option would be to move all of your crypto holdings to stablecoins such as tether (USDT) and Circle’s USD Coin (USDC). Stablecoins are a special kind of digital asset that is meant to be stable, valued equally to a real-world asset, such as the U.S dollar.

This gives a stablecoin two major advantages: a lack of volatility – which is a problem for even some top cryptos such as Ethereum – and a certain measure of trust. Moreover, being a virtual currency rather than fiat, stablecoins are ideal and quick for inter-cryptocurrency trading, which would allow you to quickly buy BTC other top tokens once crypto markets start recovering.

Numerous quality altcoins will often be available for rock bottom prices during a bear market. You could likely double or even triple the number of digital assets in your portfolio by taking profits at the right time and then buying back in at a later date.

Preparing Your Portfolio During the Bulls

If the bleeding in your investments seems to have stopped, and you can see volume starting to pump back into different projects, then it might be time for the bear market to go into hibernation. It’s often tough to identify the bottom, but if the market has been chopped down at the knees, it’s likely a good time to start accumulating.

Keep in mind that investors will likely be much pickier when buyer confidence and trading volume returns if they have been burned previously. Be careful only to place your investment in substantial projects with promising and practical use cases. This is a great time to get in on projects which may have been too costly for you to invest in before.

As always, it’s essential to do your research, and you should never invest more money than you can afford to lose. Cryptocurrencies are still very new as far as financial instruments are concerned, and they are incredibly volatile. It’s essential to diversify your assets to secure your financial future.

Bitcoin Could Be On the Verge of a Full-blown Bull Run

Since the $3,700 low witnessed on March 12th, which has been dubbed Black Thursday, Bitcoin has surged higher, rallying as high as $7,470 in an inspiring run. While impressive, the king crypto is not yet in a full-blown bull run, but analysts are gaining confidence a bull run is near.

Glassnode, a leading cryptocurrency data firm, suggested on April 15th, 2020, that according to one of its proprietary indicators that accurately timed Bitcoin’s market tops, a full-blown “bullish trend reversal” may soon be confirmed.

Although Glassnode’s indicators do not explicitly point to the commencement of a BTC bull market just yet, many well-known crypto analysts are convinced that this period of the market cycle is imminent.

Speaking to Bloomberg, Mike Novogratz — CEO of Galaxy Digital and a former Goldman Sachs partner — remarked that he remains long on gold and Bitcoin, citing monetary policies being implemented to combat the coronavirus that will result in printing money en-masse.

Novogratz also signaled that he’s bullish on Bitcoin because he has noted it sees strong adoption from institutional players, specifically pointing towards high-net-worth individuals and hedge funds entering the industry.

Whales

‘Whales’ can be defined as persons who hold a significant amount of a specific digital token that when they make a move to buy or sell, they don’t just make a splash in the market – they make waves!

These waves can be large enough to have a significant impact on the whole market. For example, as crypto markets crashed on March 12th, 2020, Whale Alert detected two consecutive transactions in BTC worth about $21.7M. The transfer was made between crypto wallets of Binance, the largest exchange on the crypto space. It later turned out that crypto whales were pushing the BTC price down to $6,000 to buy the dip before the next bull market broke out.

An example of a whale could be Vitalik Buterin, Founder of Ethereum, who currently holds about 350,000 ETH. Since they have abundant crypto holdings and the crypto markets’ unregulated nature, whales can move prices in their desired direction.

Many cryptocurrency traders pay close attention to whales and watch how, when, and where they trade. This way, they can go along for the ride and profit alongside the whale – or avoid going against the whale, as that would result in losses.

It’s not all that easy or straightforward to spot a whale. You need to look out for abnormal changes in prices and volatility during periods expected to be quiet and stable.

Final Thoughts

If you’re aiming to become a prosperous crypto investor, you’ll probably need to be able to respond to bear and bull markets in the right way and, where possible, align your trading action with those of popular whales. As a general rule of thumb:

  • Buy the dips in a bull market.
  • Sell the rips in a bear market.
  • Do both in a stagnant market.

Fully understanding what a bull or bear market means for crypto prices could be the difference between making substantial profits and suffering significant losses.

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More importantly, growing familiar with the terms frequently used by the crypto community will allow you to keep up with more in-depth scrutiny of behavioral tendencies and price fluctuations.

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