The cryptocurrency market experienced a massive sell-off in recent weeks, but these are exciting times for the digital currency and blockchain ecosystem as a whole. There is no shortage of innovative projects and ideas trying to tackle existing issues in the crypto space. From decentralized exchanges to new consensus algorithms, there is plenty of innovation taking place. However, it remains to be seen whether we have already hit the bottom or if this is just the beginning of a prolonged bear market.
Signs that the bottom is near
The easiest way to determine whether the current bear market is nearing its end is to look at the correlation between volume and price. Exchanges and other trading platforms indicate the level of volume by the color of their charts. When the charts are red, it indicates that the volume of trade has decreased and the price is declining. When the charts are green, it indicates that the volume is increasing and the price is rising. A chart that is mostly green with only a few red bars is a sign that the market is nearing a bottom and is ready to start rising again. The number of green bars and volume starting to increase is a strong sign that the market is ready to break out of its downward spiral and start climbing again.
Institutional money will enter the market
The main reason that the price of cryptocurrency fell so dramatically was that the SEC, FINRA, and other regulatory bodies around the world started cracking down on fraud. They issued a plethora of warnings to potential investors and told them to be wary of the many scams and fraudulent projects in the space. Many legitimate projects and ICOs were caught up in this wave of regulation, causing them to lose funding and be shut down by regulators. All of this caused the markets to plummet, but regulation is actually good for the long-term health of the cryptocurrency markets. This is because the more money that enters the market, the more the price will rise. When large funds enter the market, they often buy sizable chunks of the coins that are currently the cheapest. They buy these cheap coins because they believe in the long-term future of the cryptocurrency and blockchain ecosystem, and they want to make a profit from the eventual rise in price. The more big-name funds enter the market and start buying low-priced coins, the more the price will start rising again. This is especially true when they move past buying at extremely low prices and start buying at a fair price again.Â
Bitcoin will rebound first and hardest
Bitcoin is the bellwether of the cryptocurrency market. In many cases, when the rest of the market is falling, bitcoin rallies. When the rest of the market is rising, bitcoin is declining. Investors will often move from other coins into bitcoin when they want to exit the market entirely. This is because bitcoin is the most well-known and established coin, so itâs considered to be more stable. When bitcoin becomes overpriced because of an influx of new money, it will drop in price first before the rest of the market, leading the way for the rest of the market to fall. This is because bitcoin has the most liquidity and is the easiest coin to sell quickly. When bitcoin falls, other coins will fall, too. When the rest of the market is falling, bitcoin often rallies, leading the way for the rest of the market to recover. This means that even though bitcoin might still be a long way from its previous all-time high, it has a good chance of becoming the first coin to recover and start rising again.
