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Understanding Crypto's Bull and Bear Markets
December 14, 2022
Blockchain Basics
The cryptocurrency market has blown up in terms of popularity. Today, more than ever, people are investing, trading, or planning to invest but are afraid to start.
Users can make well-educated decisions in crypto investing by understanding how the crypto market works. As such, we will explore crypto bull markets and crypto bear markets, explaining what they are, and how you can invest across them.
Crypto investors will typically use terms like "bullish" and "bearish" to describe big swings or fluctuations in the market, but what do these terms mean? Let’s go over each of them individually so you can learn the difference between a crypto bear market and a crypto bull market.
Bear markets are defined as a prolonged period with a significant decline in the crypto prices.
In a crypto bear market, the value of most coins drops 20% from previous highs, causing pessimism and negative sentiment among investors. This bleak outlook often encourages even more selling, which can create a cycle of decline in the crypto space.
Some investors try to take advantage of bear markets by “buying the dip” on cryptocurrencies with high growth potential.
Bull markets are defined as a point in time where the majority of investors are buying. In a bull market demand outweighs supply, market confidence is at a high, and prices rise .
In a crypto bull market, values might increase by 20% or more from previous lows. This strong upward trend occurs when investors are optimistic about the future performance of an asset or the overall indexes within the market.
Now that you know the basics of crypto bear and bull markets, you might be wondering how you can invest in crypto when they occur. crypto in them.
No matter the market conditions, it is always a good idea to analyze the supply and demand for a cryptocurrency and review market patterns.
Whether markets go up or down, staying focused on the long-term has been the most successful strategy historically.
Predicting whether volatility will die down in a few weeks or a few years is almost impossible to do. One of the safest ways to weather the storm and preserve the value of your initial investment is to build a risk-adjusted portfolio.
Remember to stay calm and assess your options carefully. For example, once you analyze the charts that follow the value of a token and you see a chart that breaks above the downtrend, you will notice that the lows will start climbing higher.
Investors might also implement strategies such as dollar-cost averaging (DCA), where they buy small amounts of an asset for a specific time frame, regardless of market conditions.
Whether the crypto markets are bullish or bearish, remember that there is always some level of risk involved in making any investment.
Never jump into investing prior to analyzing all aspects of it and considering how much you can actually afford to invest and potentially lose. If you want to invest in crypto for the long-run, consider taking a set-it-and-forget-it approach with an automated risk-adjusted portfolio.