Due to the age of the average investor in the cryptocurrency market, this is likely their first experience with investing at all. This means that there’s a lot to learn. If you are new to investing, then you’ve likely heard people talking about crypto bull or bear markets, but you might not be sure what they mean by that. In this article, we’re going to go over exactly what this means for you and your investments.
It’s possible to make money in both bull and bear markets, but there are different strategies for each one. Investors should be cautious when putting their money into cryptocurrency markets no matter what type of investing environment we are experiencing. There’s serious pitfalls to avoid here though, so we’ll also be going over some strategies that you can use in both markets.
In the world of investing, a bull market is generally a positive thing, and it even makes people who generally would not care about certain investments stand up and take notice. Cryptocurrency investors experienced this toward the end of 2017, and they saw many of their investments skyrocketing overnight.
A lot of new money entered the cryptocurrency space, and that pumped a ton of money into many projects. This interest was brought about by the massive gains Bitcoin experienced, attracting the attention of the mainstream media, and dragging in those who had never heard of or at least had never been interested in cryptocurrency before.
Investors who are coming into the space during a bull run should be extremely cautious. What goes up must come down, and it’s easy to buy in at the top when the bulls are running. While this can feel like a great decision at the time, you could be setting yourself up for disaster a couple of months down the road. When choosing your investments you should carefully analyze each asset to be sure that it is not trading at an inflated and unstable price.
If you’re interested in making money here you’ll need to choose your investments carefully. Look for high-value projects which are still under the radar. Don’t buy into ones that are already rocketing up in volume as this is a good way to catch them just in time for the value to crash back down to Earth. Make sure to analyze the long-term price charts, and not just the recent volume and price changes to see if you’re truly getting a good deal.
A bear market is one which is in a downward trend. At the beginning of 2018, our fabulous bull run ended, and the charts began correcting themselves. Since cryptocurrency is a very new and unproven space, this greatly shook buyer confidence. After prices began to fall many of them panicked and sold their investments as well. This put a great deal of sell pressure on the market as a whole, and it has not yet managed to recover.
While owning a losing investment can make anyone depressed, it does present a very interesting opportunity. Depressed cryptocurrency markets tend to slash the prices of every project since they all follow Bitcoin so closely. This means that investors who are willing to wait out this depression could find themselves in a very good position when the bear cycle decides to recede. For value investors, crashing markets are a dream come true.
Investors looking to take advantage of these prices, however, should spend a good deal of time researching their chosen assets. There’s a lot of great deals around, and if you can find a good deal on a token or coin that you believe has a solid project, then you have a great opportunity to establish a position that you otherwise would not have had access to a few months ago.
If it seems that everything is going crazy and you’re afraid that a bear market may be imminent, then it may be in your best interest to reduce many of your positions. Especially positions in less proven currencies that may now be highly inflated. Though even top coins or tokens like Bitcoin and Ethereum can experience heavy losses in bear markets.
Your best bet is to move much of your holdings to other assets such as cash or perhaps precious metals. These assets will not only hold up better during a crash, but they could also put you in an excellent position to be able to buy up dips in the market when the bear does rear its ugly head.
Many quality cryptocurrencies will be available for rock bottom prices, and it’s possible that you could double or even triple the amount of coins in your portfolio by taking profits at the right time and then buying back in at a later date.
If the bleeding in your investments seems to have stopped, and you can see volume starting to pump back into different projects, then it might be time for the bear market to go into hibernation. It’s often extremely difficult to identify the bottom, but if the market has been chopped down at the knees it’s likely a good time to start accumulating.
Keep in mind that investors will likely be much more picky when buyer confidence and trading volume returns if they have been burned previously. Only place your money in solid projects with real-world use cases. This is a great time to get in on projects which may have been too expensive for you to invest in before.
As always, it’s important to do your own research, and you should never invest more money than you can afford to lose. Cryptocurrencies are still very new as far as financial instruments are concerned, and they are extremely volatile. It’s important to diversify your assets in order to secure your financial future.