If you're new to cryptocurrency investing, you've probably heard terms like crypto bull/bear markets and crypto whales, but you're not sure what they mean.
The reality is that you can profit in both bull and bear markets, but each needs a different strategy. Regardless of the type of investing environment we are in, investors should be vigilant when putting their money into cryptocurrency markets because there are serious pitfalls to avoid.
Bears
When we talk about a cryptocurrency bear market, we're talking about a market that's characterized by caution and pessimism, with traders preferring to sell rather than purchase.
The decline in Bitcoin in 2018 is a great example of this. BTC prices began to fall at the beginning of 2018, causing buyer interest to be shaken. Investors holding BTC panicked and sold their holdings as rates started to fall, placing a lot of pressure on the market as a whole.
Although owning a losing investment can be depressing, it can also be a lucrative opportunity. Since they all closely follow BTC, bearish crypto markets appear to lower the prices of all projects.
This suggests that investors who are able to stick out the current bear market will be in a great place when the bear market ends. Crashing cryptomarkets can be a fantastic opportunity for value investors.
However, buyers who want to take advantage of these low prices should do their homework on the digital assets they want to buy. If you can find a good deal on a token or coin that you believe has a solid project and use case, you'll have a good chance of establishing a spot that you wouldn't have had access to under other market conditions.
As an investor, it's important not to confuse a bear market with a chart price correction. A bear market is a phase of measurable downward pressure that lasts for a long time. When the price of an overvalued digital currency corrects itself, it is called a price correction.
Bulls
A bull market is one that is characterized by optimism and investor faith. A bull market is one in which the market trend is upward.
Cryptocurrency investors saw this happen at the end of 2017, and many of their holdings skyrocketed overnight. A lot of new money poured into the cryptocurrency market, putting a lot of money into a lot of ventures.
The huge gains sparked interest in bitcoin, gaining the attention of the mainstream media and attracting others who had never heard of or were at least interested in cryptocurrencies before.
Investors entering the space market during a bull market should exercise extreme caution. What goes up must come down, and when the bulls are off, it's easy to buy in at the top. While this may seem to be a good idea at the moment, you may be setting yourself up for a catastrophe a few months down the road.
You should carefully examine each asset before investing to ensure it is not selling at an inflated and unsustainable price.
Preparing for a Bear market
If it seems that everything in the markets is collapsing and you believe a bear market is on the horizon, it might be in your best interest to reduce many of your positions. Positions in less well-known digital currencies can become wildly inflated as a result. Even the most common coins, such as Bitcoin and Ethereum, will suffer major losses in bear markets.
Moving all of your crypto holdings to stablecoins like tether (USDT) and Circle's USD Coin is the best choice (USDC). Stablecoins are a type of digital asset that is designed to be stable, with the same value as a real-world asset like the US dollar.
This provides a stablecoin with two major benefits: low volatility (which is a problem for even some of the most common cryptos, such as Ethereum) and some level of confidence. Furthermore, since stablecoins are a virtual currency rather than fiat, they are ideal and fast for inter-cryptocurrency trading, allowing you to buy BTC and other top tokens quickly once crypto markets recover.
After a bear market, several high-quality altcoins would be available at rock-bottom rates. By taking income at the right time and then investing back in at a later date, you could easily double or even triple the amount of digital assets in your portfolio.
Preparing during a Bull market
If the bleeding in your assets seems to have stopped and volume is beginning to flow back into various ventures, it might be time for the bear market to retire. It's not always easy to spot the bottom, but if the market has been sliced in half, it's probably a good time to start accumulating.
Keep in mind that if you've been burnt before, you'll be a lot pickier when buyer interest and trading volume return. Make sure you only put your money into ventures that have a lot of potential and real-world applications. This is an excellent time to invest in projects that were previously too expensive for you to consider.
Always do thorough research before investing, and never spend more money than you can afford to lose. Cryptocurrencies are still relatively new in the world of financial instruments, and they are extremely unpredictable. Diversifying your assets is critical for securing your financial future.
Final thoughts
If you want to be a successful crypto trader, you'll need to be able to adapt appropriately to bear and bull markets and, where possible, match your trading activity with that of well-known whales. As a general guideline:
In a bull market, buy the dips.
In a bear market, sell the rips.
In a market that isn't moving, do both.
Understanding what a bull or bear market means for crypto prices can be the difference between making big money and losing a lot of money.
More importantly, becoming familiar with the terminology commonly used by the crypto community will allow you to conduct more in-depth analysis of behavioral patterns and price fluctuations.
