By now we all got used to the Bitcoin dips and a crypto bear market but what you didn’t know is why. Are you in a bad position because of the bear market?
Wait don’t answer coz I already know you are. The question is: do you want to find out how to take advantage of current market conditions?
If the answer is yes, then we will embark on a journey to find out how we can be profitable even tho some of you already lost hope.
When and how you ask?
You will agree with me that to be profitable, we always looking to buy low and sell high.
Bear markets can represent buying opportunities, and it is quite common to trade on dips rather than volatility. Surly volatility is the main focus but buying the dip looks like a better strategy on current market conditions.
It depends on individual interests since everyone wants to achieve different targets or dreams.
This article is a guide that will help you understand when is the best time to take action and what to look out for when deciding to buy into the dip.
What is a BM (bear market)?
During a BM period, investing could look risky. However, experienced investors know this is the best buying opportunity. A bear market can represent periods of days, weeks, months or even years where prices are declining. The term is often used about the stock market, but it is also used in the crypto market. A BM is the exact opposite of a bull market, where asset prices are continually rising.
Bear markets are driven by investors who lack confidence or because the asset fails to deliver its product. Since we are dealing with cryptos, the product is the technology that backs blockchain and the Dapps build on it.
Several investors choose to sell off their cryptos to cut losses and creating even more negativity driving the markets further down.
Naturally, bear markets are identified by a 20% or more decline for stocks over a minimum of two months. However, in crypto markets, this can occur in a single day or even hours.
When does a bear market occur?
Measuring and identifying a bear market is both an art and a science. One laugh measure states that a bear market occurs when at least 80% of the total stock prices decrease over an extended period. Another measure declares that a BM happens if specific market indexes — like the Dow Jones Industrial Average and the S&P 500 — drop at least -15%. Then again, different market segments can experience bear markets at different periods and percentages.
For cryptos, we experienced an 80% decline in a year and that’s because of delayed SEC ETFs approvals and scams.
Remember that cryptos are different and only a single positive announcement can push the market on positive gains of more than 20% in a day.
The characteristics and effects of a bear market differ
Most financial theorists have agreed that investor sentiment and economic cycles are both partakers in the creation of momentum for bear markets. Generally, a fragile or weakening economy that is shown by low disposable income, low employment as well as decreasing business profits encourages a BM. The presence of more new trading lows for prestigious companies can also signify that a BM is around the corner. It is imperative to understand that government involvement has an effect on bear markets. Variations in several tax rates and the federal funds rate can inspire economic growth or contraction, eventually resulting in bull or bear markets.
Even though its rather a measure to quantify, investor sentiment drops and that fuels the BM on all sectors from IPOs to crypto.
Think about it for a second. If people are generating less revenue monthly that will not incentify them to invest elsewhere. Also, such events will push the average retail trader or investor to pull out whatever they have from the markets.
Bear market phases
Irrespective of their precise beginnings and ends, bear markets characteristically have four stages.
The first phase, prices are high and so is investor sentiment. However, investors are starting to take profits then exit the market.
In phase two, prices start to fall, and investor sentiment becomes negative, and for some investors even panic. Crypto markets will reach new lows, and the traded volume and market cap will drop.
Is getting more interesting in the third phase, when trading volume increases but not the prices because of new speculators that enter the market.
With the fourth and final phase, it looks like a fading “pulse” of a “patient” that’s about to die.
Smart investors know that the prices are low enough and they wait to respond on good news or somewhat HYPE.
Don’t worry our “patient” didn’t die and it looks like his “pulse” is getting stronger!
Bull vs. Bear Crypto Markets
OH YES, the archenemies of the global market, where one cannot exist without the other, the Yin and Yang, the black and white The Bull vs. The Bear.
A bull market is driven by strong optimism and confidence from investors and traders. So as you can see how the shift from a Bear to bull market its occurring.
Have you ever wonder why they are called bull or bear? Well if you think about for a second, it will make sense and you will even have a laugh!
Think about how both beasts are attacking their victims. The bear is standing on his feet and bashes downwards with his paws while the bull is using his horns to launch his target upwards.
Bear Market vs. Correction
Do not confuse a bear market with a correction that can appear in between bear and bull markets. Whereas BMs rarely provide appropriate points of entry. The is because determining a bear market’s bottom is almost impossible. Trying to recover losses can be difficult unless the investors use other strategies or short sell to profit in falling markets.
Well if you want to be nerdy and technical about trading volatility on a bear market click here!
Short Selling in BM
Investors can still profit in a BM by short selling; it is a risky trade that can result in heavy losses. So, the seller’s profit and loss sum is the difference between the selling price and the price of repurchase. This amount is referred to as “covered.”
For example, if an investor shorts 100 coins at $94.00. the price declines and coins are covered at $84.00. The investor gains a profit of $10 x 100 = $1,000.
That’s not the only strategy and depending on the exchange you can use arbitrage or buy/sell limits or stops.
Bear markets are quite costly for investors that got in at the highest price.
But don’t despair! Bear markets will not last forever, and they do not often give any warning of their arrival.
Keep an eye out for future events orbiting around the crypto space and understand that any positive news will help the bull to stand strong again.
As an investor, you probably know when to buy or sell but if you missed out the latest news stay tuned with us.
PRO TIP! Try to “time the market,” or measure when a bear market has started and when it will possibly end.
Analysts spend hours trying to mathematically figure out what will trigger the next bear market as well as its duration.
Are you a crypto enthusiast? Do you purchase coins or tokens at their highest? Do you feel like giving up?
DONT DO IT!!! JUST HODL coz HYPE is COMING!!!