The crypto market is always volatile and volatile. This is due to the fact that the market is still young. Bitcoin, the most popular cryptocurrency, is less than two decades old, while the rest of the market is very young. Therefore, it is always easy for small markets to be shaken easily due to the small daily trading volume. That is why it is very important to learn how to deal with downturns in the cryptocurrency market. Let’s find out more.
What is a bear market in cryptocurrency?
A bear market in the cryptocurrency market is a trend that dominates the market and results in a decline in the prices of digital currencies. This may happen for several reasons, including economic reasons and reasons related to digital currency news and the price of Bitcoin and Ethereum. This decline does not necessarily result in a bear market. We have talked about the bear market before and it is different.
A bear market can simply be said to be a continuous decline in the market for several consecutive months that may reach a whole year. For example, from December 2021 until the end of December 2022, the cryptocurrency market was in a continuous decline and therefore this was a bear market.
But in 2023, the situation is completely different. The year is divided between periods of rise and periods of decline. Therefore, the situation this year is much more difficult than the previous year due to the lack of clarity of a single dominant trend. Although the upward trend may be controlling the price of Bitcoin and Ethereum, it is not entirely clear in the price movement of altcoins.
So how can we deal with these downturns? Can we benefit from them? And how can we avoid the financial and psychological damage resulting from this period? Let's find out more.
In the cryptocurrency market, always look at the big picture!
It is well known about the cryptocurrency market that you should always look at the big picture. As we said, the market is young, which means there is a lot of room for growth and development. Therefore, your outlook should always be progressive and sustainable. Try not to focus on the price movement within hours, a day, or even a week. Always look to the coming years.
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When Bitcoin fell below $10,000 in the last bear market, there were many rumors about the end of the digital currency and the entire cryptocurrency market. But only those who managed to survive and make profits were those who looked at the big picture at the time.
Indeed, Bitcoin and the entire market regained strength to rise again, and the crazy 2021 market ended with Bitcoin reaching $69,000.
So if we look at the whole picture in August 2023, we will notice the following:
The bottom was formed in December 2022 at $15K.
The market has been recovering steadily ever since.
BlackRock issued a request to create a Bitcoin investment fund last June.
Ripple beats SEC in high-profile lawsuit
Inflation in the United States has been falling steadily for a year now.
All these events show that a bull market is coming soon. This market may start in 2024 or even 2025. So when the market falls like it did in June or August, it should not affect our outlook.
Be happy with red candles in the cryptocurrency market
We always say chase the red candles, not the green ones. This means buying when no one else wants to buy. These moments came a lot in 2023. In March, when the US banking crisis happened, no one was interested in the cryptocurrency market. This was the beginning of the strong rally that happened in April.
After this also in June there was another decline which resulted in a strong rise. And now in August there is another strong decline. The trend here seems clear. Every time there is a decline the price bounces back strongly.
This is a sign of the beginning of a bull market. The bull market may not have started yet, but it is about to start.
So you don’t want to buy during a bull market. This is the biggest mistake to avoid in the cryptocurrency market. Usually the best time to buy is during a bear market and even during a very bearish market.
When no one is interested in cryptocurrencies at all, no one wants to invest and everyone claims that this is the end of the market, this is the best time ever to invest. Big investors always take advantage of these times to buy cryptocurrencies at cheap prices.
After this when the global economic conditions start to improve and people start to take an interest in cryptocurrencies they start selling their coins to others.
Do not invest more than you can afford to lose.
One of the most important tips to follow in the cryptocurrency market is this advice. Inexperienced investors always risk everything they have, and this is wrong.
You need to understand the market dimensions well. The cryptocurrency market is basically a speculative market. This means that the failure rate is very high. Therefore, it is not wise to put all your money into this market and even if you do, it is not wise to allocate all your money to one coin or project.
Diversifying your digital portfolio is very important here. In addition, you should always do your own research. If you want to invest in a project, read the project’s whitepaper and check the validity and trustworthiness of the project. Also, check the design of the token economy of the currency.
All these steps will help you determine whether this investment is a good one or not. If you are convinced that the project may increase its currency value significantly, you can put money in it, but always remember the rule. If this money is important and essential to you, do not put it and wait until your financial situation improves and then invest. If you miss the opportunity to invest in this project, many others will come in the future.
But never invest what you can’t afford to lose and never borrow to invest in cryptocurrencies. A volatile market like cryptocurrencies can never be relied upon. We have seen some unplanned disasters like the one that happened in 2022 and how badly it affected the market.
Conclusion
Invest to improve your life circumstances, not to harm them. So never forget this. You should also maintain your mental health and not let the market fluctuations control your nerves.
Remember that what matters in the end is either the loss or the realized gain. This means when you sell. You may enter into an investment that remains a loss for a whole year with an unrealized loss and then after that it multiplies several times and you find yourself a winner. If you sell then you have a realized gain. In the world of investing, the loss and the gain are always unrealized until you sell. Always remember this.
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