Bear Market? This is the explanation and how to deal with it
Fluctuation is very often mentioned when we talk about finances. Likewise in cryptocurrencies, the prices of crypto assets in the market must fluctuate either down or up. There are two terms that describe this phase, namely Bear Market and Bull Market. The bear market phase is where the price conditions in the market are going down. Want to know what that means? Let’s talk about the Bear Market first. Come see the explanation below.
Get to know the term bear market
Bear Market is a condition where prices experience a negative trend on assets and charts that show a downtrend. Meanwhile, the opposite of the Bear Market is the Bull Market which describes a condition where prices experience a strengthening trend.
Why is it called Bear and Bull?
Literally, bears and bulls have nothing to do with cryptocurrencies and stocks. But philosophically, the use of the terms Bear and Bull has its own meaning. When fighting, the Bear thrusts its claws downwards, while the Bull thrusts its horns upwards. This fighting technique is adopted in describing stock market conditions.
When you identify the condition of the highest point in the stock market and see an increase of 20%, then it indicates the market is in a Bull Market period or it can also be called bullish. Conversely, if you identify a condition where the lowest point of the stock market has decreased by more than 20%, then the market is experiencing a bear market or bearish.
Also, read an explanation of Crypto Winter here.
Causes of Bear Market
In crypto, Bear Market is very difficult to predict when the cycle will start based on the previous trend. In general, Bear Market conditions occur due to:
There is a whale that sells all assets at one time. Whale is a term for investors who have very large crypto assets. Their movements can affect the price of the asset. If the whales suddenly sell their assets in large quantities, then market conditions will be affected and can bring bearishness. Therefore, you need to pay attention to the movement of the whale to determine the steps.
There is intervention from the regulator, for example, the Government imposes restrictions on software and mining, then mining activities are forced to go offline. This can cause uncertainty in crypto assets which can lead to a bear market.
The emergence of negative sentiment from traditional finance. For example in 2017, JP Morgan CEO Jamie Dimon mentioned that Bitcoin was a scam, just months before the BTC price hit US$20,000 per unit and then the price fell.
Lower trading volume. When there are no buying and selling transactions, the circulation of demand and supply will be affected and not run properly. This will then affect the market conditions are bearish.
Tips for Dealing with Bear Market
Don’t be nervous and panic
Bearish often has an emotional impact on traders and investors because prices continue to decline. If you are faced with this condition, try to remain calm so as not to make decisions impulsively.
Do Dollar Cost Averaging (DCA)
When the market experiences a bear market, you can take advantage of the price decline to buy assets that have good potential. You can make crypto purchases slowly and gradually or we can call it regular savings. For example, if you have IDR 10 million in funds to buy Bitcoin (BTC), you can buy IDR 1 million worth of BTC every month for the next 10 months regardless of rising or falling prices in the market.
The goal of DCA in a bear market trend is to get a big profit when the market has reached bullish. DAC is also suitable for beginners so as not to be dragged into FOMO and to avoid panic selling.
Do in-depth trend research and understand the key indicators
You have to be able to analyze technically without being influenced by emotions. For example, by studying the current trend conditions through various news articles, the latest regulations and significant crypto movements.
So, do you understand what a bear market is and how to deal with it, right? Continue to follow our articles so that you understand more about crypto. Also check out crypto investment tips here. Don’t forget to visit the Litedex, Instagram, Twitter, YouTube and TikTok websites to keep getting updated information from us!
