If you are a novice investor, it is best to avoid trading and speculating in a bear market.
For those who do not know what a bear market is, it is a market in which there is a downward decline in the price of cryptocurrencies and in which the prices of digital currencies continue to drop unhealthily.
Bear markets are caused by a variety of factors such as government influence, negative news, the role of cryptocurrency exchange platforms, among others.
There is no specific time range or schedule for the end of the downtrend. But cryptocurrency market volatility often creates some opportunities due to high volatility and the lack of systems and regulations for trading and speculation.
Despite the high risks in trading and speculation in bear markets, beginners may continue to trade in a bear market and make some profits.
In this article, we will cover 5 things that you should pay attention to that will help you choose the right digital currency for trading, especially if you are looking for an alternative digital currency (other than Bitcoin).
1_The market value of the digital currency
Market value is simply defined as the current price of an asset's digital currency multiplied by the total number of tradable digital currencies. For example, if the price of a digital currency drops to $ 2 from $ 4 and there are 10,000 of that currency in circulation, the market value of that currency would be $ 20,000 instead of $ 40,000. As estimated, in the overall bear market, there is a drop in the prices of most cryptocurrencies which affects the market value of these cryptocurrencies.
It is worth understanding that currencies with a small market size are more likely to change prices more sharply than currencies with a large market. So always look for the currencies with the maximum acceptable market risk ratio.
2_Volume
Volume is an invaluable indicator that can aid in making informed investment decisions in a bear market. Volume also provides an indication of price movements and aids the crypto trader in determining whether or not to buy a particular currency.
Cryptocurrencies with a steady increase in volumes have the right ability to make profits and trade quickly and also a steady decrease in volume is an indication of low activity and traders should abandon these currencies for ease of manipulation.
3_The importance of currency in the cryptocurrency community
Usually, each cryptocurrency is targeted towards specific industries. Bitcoin was introduced to facilitate faster payments and other financial transactions, thus removing the hassles associated with the traditional banking system. Ethereum was introduced to improve financial transaction capabilities and develop decentralized applications (dApps).
It is wise to consider the market that each currency is dealing with before deciding to trade it in the bear market. When you have a trader with cryptocurrencies in mind, check in along with other things, such as a worksheet for projects, and use their visibility to make a decision.
4_Adopting new innovative products
A cryptocurrency becomes advanced and innovative through its frequent introduction of new innovative products or technologies. The volatility of digital currencies, based on news and events, and the introduction of new ideas tends to endear and motivate investors for this currency, which helps improve its importance.
5_Strong community
Check out a currency with a vast network of stakeholders and a community around the currency, then you can just set yourself a cryptocurrency with future stability potential fueled by response and diverse ideas geared towards improving the currency. An active and responsive user community is also an indicator that can guide choosing a good currency to trade in a bear market.
_Conclusion and conclusion
Trading in the bear market in particular is based on diligence and experience. Although these five tips are not provided as a recommendation that you should work on, you should understand that these are just guides and that it might be impossible to get a cryptocurrency with all five characteristics. Trading in this regard should be done through the gathering of more knowledge as well as taking care of the personal discretion of investors.