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What is Bear Market and How to Identify it?

Everyone wants to become a crypto investor, but what happens when the price drops across the market? What’s the most common and worst mistake you can make? What are some strategies to help see you through this turbulent time?

Here’s everything you need to know about a bear market and how to identify it.

What Is A Bear Market?

A bear market is a prolonged period of price declines in a stock, coin or token, or across an entire market, usually of 20% or more from a recent high. Bear markets can happen in the current financial markets or within the cryptocurrency market.

Types Of Bear Markets

Here are three types of bear markets to be aware of and the events that can trigger them:

● Cyclical Bear Market

This bear market is part of the normal business cycle and is caused by things like rising inflation or interest rates, among other things. This cycle may only last for a short time, but it does happen quite often and, in some ways, is needed to keep the markets in check.

● Structural Collapse Bear Market

This bear market starts with a financial collapse or significant market imbalances in any sector, often leading to a global financial crisis. For example, in 2007 and 2008, the subprime mortgage bubble in the United States pushed the whole market down, where it stayed for more than a year.

● Event-Driven Bear Market:

Any event in any part of the world can make investors fearful or wary, which can result in panicked selling of investments and this can cause the market to crash. You saw the most recent one, which was caused by COVID-19. At that time, the markets went down by 20% to 30%.

How To Identify A Bear Market?

No one can say for sure when a bear market starts and when it will end. But since both bear and bull markets go through cycles, it’s clear that we can put together the facts and draw conclusions under certain circumstances.

Here is a list of such conditions:

  • Out Of Trend Charts

Look no further than the crypto coins and/or tokens that you think drive the cryptocurrency market, like Bitcoin, Ethereum, or BNB. You will see the charts are out of trend on most projects. One does not need to be a technical expert to spot these trends as they are relatively easy to spot. Still, if you are one, you will notice the primary channels or the symmetrical triangle patterns go out of trend repeatedly.

● Stable Coins Marketcap

The investors who wish to secure their profits will start moving their positions into stable coins pegged to the dollar, resulting in an increased market cap for stable coins.

Below are the current charts of BUSD and USDC, and if you notice, the market cap on both has seen a steep increase since mid-January 2022.

  • Portfolios Down

If you look at your portfolio, it’s easy to tell if we’re in a bear market or not. During a bear market, the value of your portfolio may drop by 15% to 20% in a short amount of time. This can make some investors nervous and can cause them to want to selll, but experienced investors will wait for the price to settle down and see a few rallies of price increases and decreases before deciding.

  • Growing Unrest

If you pay attention to social media platforms like Twitter and Telegram, some initial optimists can change into pessimists who are upset about the price drops. Here’s the thing: no one wants to see their portfolio go down by 20% or more, but that’s just how the game works. The important thing ios to not let fear, uncertainty and doubt rule your investing decisions.

  • Institutional Buys/Sells

The term is “institutional,” but big or institutional buyers are usually called “whales” in the crypto project world. The big sales and purchases can change the price of a token by 10% or more, which can repeatedly happen for weeks. People will talk about “whales” giving up their positions.

  • Reduced Demand

The same token or coin in high demand that has people ready to pay a premium price is typically never bought at a price that is down by twice or even ten times.

Whether you’re a newbie or a veteran crypto trader, the market can be unpredictable. This becomes especially true in bear market conditions. Knowing how to identify bear markets and bear market strategies can help novice and veteraninvestors navigate these turbulent waters. Are you ready to begin? Visit rematictokens.com for more information, or follow our YouTube channel and tune in to our Rematic Education video series.