What is a Bearish Market?

A bear market is a condition in which stocks or Cryptocurrency prices fall and widespread pessimism causes the market’s downward spiral to be self-sustaining. Investors anticipate losses as pessimism and selling increases. Although figures vary, a downturn of 20% or more from a peak in multiple broad market indexes, over a two-month period is considered an entry into a bear market.

Looking at Bitcoin price for last 3 months, Jan had a peak of 15K USD, since then price has sharply fallen to almost around 6.5 K USD. This shows the signs of a bear market.

A bear market should not be confused with a short term correction, which is a short-term trend that has a duration of fewer than two months. While correction offer a good time for value investors to find an entry point into markets, bear markets rarely provide suitable points of entry. This is because it is almost impossible to determine a bear market’s bottom. Trying to recoup losses can be an uphill battle, unless investors are short sellers or use other strategies to make gains in falling markets.

Now if you see the Bitcoin charts the downward spiral had started from the peak in Dec but the real slip started from 1st Week of Jan. While it may still be considered early to say if we are in a Bearish market but unlike in stock markets the cycles in Crypto markets are much faster and hence the entry and exit points for Bearish markets in Crypto currency can also be of shorter duration than we may anticipate in traditional markets.

Now the above image is apt to show how currently capital flight is happening in both the stock and crypto currency markets. If we see the crypto currency markets for last few days it can be said as a deep Bearish market for some. This has made many to exit the markets altogether and for some it is a uncomfortable HODL as they bought the crypto currency when the market was at the top part of a Bullish surge.

The above coin market cap can be an easy indicator of how not only Bitcoin but the whole Crypto currency market is bleeding. While the mainstream media has been trying to find many reasons for this market including the Chinese New Year, to the weakening consumer confidence in the markets at large who are pulling out of the markets to Fiat at large. But for some it is a part of a large correction cycle that happens before the Bulls run free.

Understanding the cycle

Despite my earlier advice many have lost money and staying coherent in a Bearish market is not really easy. But if you refer to the below link

It is often seen that the market goes through different phases and trends from time to time. Some time it is the bull phase, sometime it is the bearish phase and then there are correction phase and steady market. As a crypto market investor you have to realize that all these phases come and go in a periodic manner depending on various factors that affect the market. No phase whether it is the positive market or the negative market is here to stay fro ever. When a market is in the bull phase and the buyers’ confidence is at the highest level, everything seems alright but then that market is not going to rise for ever, there will certainly be a correction phase and the market will also see the down turn.

Hence we are just at a seasonal dip in Cryptocurrency markets. Now many whom I met spoke the virtues of the intra-day trading and how people have made huge profits. But many should not under-estimate the virtues of medium to long term trading in Cryptocurrency markets given that still this market is a growing segment and it has no where reached its saturation peak. Hence it is advisable that people who join the markets during the rally and get rekt during the down turn think also to keep a part of the portfolio for medium to long term this way they stand to not only cover losses during a bearish run but also gain much more ROI than people think can do in a Intra day trading cycle.

Hugging the Bearish Market

Likewise the bear market or the negative market is not going to stay like that for ever. This is the primary thing that you need to understand to stay positive and focused in the negative market. Generally in a negative market the buyers get panicked and sell at random to save some of their investment. This act of hurry and panic further take the market down as the demand for the crypto currency during the down phase is very low. But a wise investor will wait for the right time to sell and make some good investment during the bad times as well.

But to invest in the negative or bear market you have to be a little more calculative and cautious. You should not get panic and listen to the rumors of the market. You have to stay focused and keep watch on the coins that you have targeted. Remember this is the best time to invest in the top performing crypto currency like Bitcoin and top performers that are available at lower price and these are the coins that will give you good returns when the market swings.

Finally

I follow the Buffet school of thought who allows money to do its job rather than him watching the graphs. Because life is short, it should be invested in better things than just watching graphs whole day and that is where fundamental analysis of the offering , technology , team and the economics of a cryptocurrency comes to play.

Its not that you should only keep investing but like any sound investment strategy one should have a wider spread to grow and also should cash out periodically and also look at some good ICOs to give multi fold ROI on investment.