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Bear Market Crypto: Understanding, locating and acting in a lower market
What is a Bear Market Crypto?
Bear Market Crypto designates an extended period when the price of cryptos and cryptocurrencies falls strongly, often more than 60 % compared to their highest historical. This phenomenon, also called the lower market , is accompanied by a drop in the confidence of investors , liquidity and increased volatility. On the Crypto market , a Bear Market can last several months, or even several years, such as the 2018 Bear Market or the 2022-2023 period when Bitcoin has November 2021 summit . A Bear Market is characterized by a succession of drops, a lack of lasting recovery and a generalized loss of confidence. Conversely, a Bull Market or Haussier market is a period when prices rise, carried by the optimism of investors asset prices .
Table of contents
The causes of a Bear Market on the Crypto market
Bear markets in the cryptos market are influenced by several factors:
- Lower demand : less investors buy , liquidity decreases, cryptocurrencies fall.
- Loss of investors' confidence : after a bull run , enthusiasm falls, fear dominates.
- Regulations : Restrictive ads, surveys or prohibitions can participate in switching the market in a downward phase.
- Central banks : increase in interest rates or restrictive monetary policies.
- Crises on the financial markets : traditional markets and the crypto market are often correlated during periods of global panic. The Crypto market representing risky assets that financial institutions sell first in times of fear.
- Events specific to blockchain and cryptos : hacks, bankruptcy of platforms, major technical problems.
How to spot the first signs of a Bear Market Crypto?
Recognizing the first signs of a Bear Market is essential for any investor . Here are the indicators and signals to monitor:
1. Prolonged price of prices
A Bear Market % compared to the historic highest of Bitcoin or LTC ltc . On the cryptocurrency market , the decreases are often more marked: -80 % on the btc , -90 % on some at ltc OOS .
2. Reduction of liquidity and volumes
When the Crypto market enters the lower phase, liquidity trading volumes decrease and investors become cautious. Traders seek to minimize losses, new entrants are scarce .
3. Negative feeling and increased volatility
Fear dominates, measured by tools like the Fear and Greed Index . An index close to extreme fear often indicates that we are in Bear Market . Volatility increases, market fluctuations are more unpredictable .
4. The metrics on-chain of Bitcoin
Several technical indicators make it possible to identify a Bear Market Crypto :
- Pi-Cycle Top Indicator : This indicator analyzes the mobile average of the Bitcoin price to detect market tops. When the fast curve crosses the slow curve upwards, this often signals a market top and precedes a Bear Market .
- Funding Rates : Funding rates on derivative markets show whether investors are mainly purchasing (Bull) or sales (BEAR). Persistent negative funding rats report a downward trend.
- Fear and Greed Index : This index synthesizes the feeling of the market. A low score (close to 10) indicates an extreme fear, typical of a Bear Market .
- At ltc OIN SEASON Index : lets you know if the A ltc OINS outperform the btc . In Bear Market , LTC OOS often fall stronger ltc bitcoin .
- NUPL (net unrealized profit/loss) : This indicator measures the share of investors in latent or loss profit. A negative nude or close to zero indicates that the majority of carriers are losing, characteristic of a Bear Market .
5. Decrease in investor confidence
The loss of confidence of investors is marked by massive outputs of capital, a drop in demand, and the media which relay pessimistic scenarios.
The phases of a crypto market cycle
The cryptos market evolves in cycles, alternating Bull Markets and Bear Markets . There are generally four phases:
- Accumulation : After a sharp drop, prices stagnate at a low level. Long -term investors are starting to buy discreetly.
- Markup : Beginning of the Bull Market , prices are rising, investors' confidence returns, liquidity increases.
- Distribution : prices reach a summit, volatility climbs, some investors take their profits.
- Markdown : Beginning of Bear Market , prices fall, fear settles down, investors sell massively.
Historical examples of Bear Market Crypto
- Bear Market in 2018 : After the 2017 bull run btc increased from $ 20,000 to $ 3,200 in one year, a drop of 84 %.
- Bear Market 2022-2023 : Bitcoin dropped from $ 69,000 in November 2021 to $ 15,000 at the end of 2022, resulting in all cryptocurrencies in a general drop.
How to enjoy a bear market in crypto?
To take advantage of a Bear Market, the platforms of decentralized perpetual contracts like Drift and dYdX now represent the best alternative to perpetual contracts of centralized platforms in particular because they are prohibited in many countries (as in France). They offer similar features: possibility of shop the market (bet on the decline), leverage, fluid trading, but without central intermediary. Thanks to DEFI , these solutions guarantee more transparency, total control over its funds and less risks linked to a blocking of withdrawals or market manipulation.
Drift
Drift offers an advanced trading experience on Solana , a blockchain renowned for its speed and very low costs. Just connect your decentralized portfolio compatible with Solana , file USDC USDC then take long or short positions on more than 50 pairs of major cryptocurrencies and tokens from the Solana .
Drift is distinguished by its ultra-competitive costs (up to –0.01 % for makers and 0.1 % max for Takers, with discounts via the fuel program), functionalities of lending, vaults, prediction markets and a reward system for liquidity providers. The platform insurance fund also generates passive income while securing users against liquidation risks.
dYdX
dYdX is the reference to trading decentralized perpetual contracts, now based on his own blockchain (dYdX Chain, Cosmos ecosystem). Just connect a compatible Wallet (such as Metamask or Kedplr) and supply its account in USDC to access more than 200 perpetual markets, with leverage up to 50x. dYdX combines the speed of execution and the market depth of a centralized exchange with the transparency and safety of the DEFI.
The costs are very competitive (0.5 % max for takers, 0.1 % for makers, with discounts depending on the volume or staking DYDX token ), and the platform is based on a decentralized governance model, reinforced by a set of independent validators.
To use Drift or dYdX, it is essential to have a decentralized portfolio in order to connect to it.
If you do not know how to use one, we invite you to download our free guide to learn how to use a decentralized wallet. This guide supports you step by step to install, secure and master the use of a non-custodial wallet, essential to access the DEFI ecosystem, manage your private keys and interact with decentralized applications like Drift or dYdX. You will find practical advice to choose the solution adapted to your needs, avoid current errors and protect your assets in an environment where you are solely responsible for the safety of your funds.
How to react during a Bear Market Crypto?
1. Do not give in to panic
Bear Markets are normal phases of the financial market and the Crypto market . Long -term investors often favor patience and analysis of the fundamentals of new projects.
2. Strategies to minimize losses
- Dollar Cost Averaging : Invest regularly the same amount, whatever the price, to smooth fluctuations and take advantage of lower prices.
- Conversion to the stablecoin s : protect your capital by temporarily passing on stablecoin s to avoid suffering the decline.
- Diversification : distribute its investments between several cryptocurrencies , blockchain or asset classes.
- Analysis of fundamentals : focus on cryptos , with broader or real use.
- Avoid impulsive trading : volatile markets can cause rapid losses for non -experienced traders
How to protect your cryptocurrencies during a Bear Market?
Cryptocurrency safety is crucial, especially during the Bear Market where the high risk of hacking or bankruptcy of platforms can lead to the loss of all or part of your funds. To protect your cryptos , it is recommended to use a physical wallet like Ledger or Trezor .
These solutions make it possible to secure your offline assets, sheltered from attacks and bankruptcy of platforms. To choose the model adapted to your needs, we invite you to consult our guides to find out which Ledger Choose and our complete Ledger vs Trezor .
Summary: Bear Market Crypto, Benchmarks and good practices
- A Bear Market is a period of prolonged decrease in prices on the crypto market , characterized by a loss of confidence in investors, a drop in liquidity and increased volatility.
- The first signs of a Bear Market include a fall of more than 20 %, declining volumes, a negative feeling (Fear and Greed Index), and technical indicators such as the Top Indicator Pi Cycle or the NUPL which show a summit already passed.
- The causes of a Bear Market include the drop in demand, the regulations, the actions of central banks and crises on the financial markets.
- During a Bear Market, it is advisable to remain patient, to diversify, to favor the stablecoin s if necessary, and to secure its cryptos on a wallet hardware. This can also be an opportunity to look for DEFI protocols to gain yields on its stablecoin s.
- The phases of the crypto cycle alternate Bear Market and Bull Market: knowing how to spot them allow you to adapt its investment strategy.
FAQ: Bear Market Crypto
What is a Bear Market and how to spot it?
A Bear Market is an extended period of drop in prices on the Crypto market, often more than 20 %. It is found thanks to the fall in prices, the drop in investor confidence, the decrease in volumes and indicators such as Fear and Greed Index or the Pi-Cycle Top Indicator.
How long does a Bear Market Crypto last?
A Bear Market Crypto can last from a few months to several years, depending on the severity of the causes and the psychology of investors.
What are the risks during a Bear Market?
The high risk of losing all or part of its capital, volatility, and the possibility of seeing certain assets fall more strongly than others.
How to prepare for a Bear Market Crypto?
Diversify your investments, favor solid assets, use stablecoins to protect themselves, and secure your cryptos on a physical portfolio like Ledger or Trezor.
What difference between Bear Market and Bull Market?
A Bear Market is a prolonged drop phase, while Bull Market is a sustained price increase phase, marked by optimism and the entry of new investors.
Conclusion: Bear Market Crypto, Vigilance and Opportunities
The Bear Market Crypto is a cyclical phenomenon, inevitable in the history of the financial markets and the cryptocurrency market . Knowing how to identify it, understanding your causes and using the right indicators allows each investor to minimize losses, seize opportunities and cross the downstream phases with serenity.
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Yohan Uzzan
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
