The Anatomy of Crypto Bear Markets and Why It Doesn't Last Forever
Apart from the tides of the sea, perhaps the next most erratic thing on the surface of the earth right now is the crypto market. For those who are familiar with cryptos, this is not surprising considering that the crypto market is still purely driven by speculations.
While the market could become more stable in the next couple of years ahead, for now one has to learn how to ride with the uncertainties plaguing this infancy stage.
And the uncertainties become far more scarier in a bear market than one could ever imagine in a bull market. A typical crypto bear market inflicts pain and losses that stagger even the most devoted crypto advocate.
Since I do not intend to write a book on bear markets, this essay will briskly xray some of the best known causes of crypto bear markets and why it doesn't last forever.
What is a crypto bear market?
Simply put, a crypto bear market is said to be occurring (or to have occurred) when crypto assets are generally and persistently losing their value (at least 30%) over a period of time.
If the definition above is correct, then it follows that the crypto market is presently in a bear market. While a few crypto assets such as Bitcoin and BNB are struggling to get out of the grip of the bear market, most others coins are hopelessly trapped between the fang of the bear market.
Why Do Bear Markets Occur?
There is no simple answer to the question above. But if one is forced to answer the question above at gunpoint, the perfect answer could be - because the bull market has overstayed or expired.
More seriously, a bear market only replaces a bull market. The death of one bull market births another bear market and vice versa. The present bear market dates back to December 2017 when most cryptos reached their all-time high.
And since it was not possible for prices of cryptos to continue moon forever, the bears unleashed their wrath upon crypto assets.
Another way to answer the question of why bear market occurs would be - because investors are massively cashing out or taking profits.
Yes. It is ethical and sane for investors to take profits when their ROI hits the roof. Unfortunately, a collective instinct to take profit, which we saw in the wake of 2018, would plunge the crypto market into one of the most unforgiving bear markets in the history of the industry.
Why Bear Markets Don't Last Forever
As threatening as the bear market may seem, it will not last forever. This is because greed is an inherent part of the human nature.
Usually, a large number of the investors who made great fortunes from the last bull market will return to buy cheap, hoping that they could sell high.
Not only that, those who missed out of the last bull run sees the bear market as a perfect opportunity to accumulate cryptos and then sell when prices appreciate again.
The actions above have historically proven to have positive impacts on the market. At the peak of the euphoria, FOMO comes into the picture and then a trend reversal which heralds a bull run begins.
If there is one lesson that the anatomy of the bear market has taught us, it is that bear markets don't last forever - for the same reason bull markets don't last forever.
I am @gandhibaba, the young man who goes about carrying his magical pen, not his gun, in his pockets.
Gif courtesy of @artzanolino