What causes a bear market?
Market insiders are predicting the start of a new crypto winter that may last up to two years! Read the article to learn the reasons for a bear market.
2022 has begun as a year marked by a massive downtrend in the cryptocurrency market. The cryptocurrency market set record after record in the fall of 2021. Bitcoin reached an all-time high of $67,000 in November. In July 2022, the most well-known cryptocurrency was valued at three times less. Total market capitalization has dropped to $900 billion. In turn, it topped $3 trillion in November!
The beginning of a bearish cryptocurrency market is indicated by crypto assets dropping 20% or more from their previous high and pricing settling at that level. Typically, such a decline is accompanied by pessimism about the short-term prospects of the market.
You may wonder what factors caused the bear market in cryptocurrency. First of all, bear markets occur frequently and are part of the economic cycle, but they indicate a future economic slump. Among the reasons for bear markets are such factors as geopolitical concerns and the bursting of market bubbles. Important to note that each bear market is unique in terms of how far the market can fall and how long it can persist.
That’s why markets are today dominated by pessimism and panic, with investors preferring to withdraw funds from high-risk assets to protect their investments.
According to Glassnode, the cryptocurrency market is entering a deep phase of a bear market.
The fundamental reason is that global inflation is rising, which is forcing foreign central banks to hike interest rates.
However, if you mistrust cryptocurrencies in general because of such downturns, we remind you that this is not the case. After cryptocurrency winter (deep bear market) is generally followed by a boom cycle.
A brief history of bear markets
For example, we can trace the cycles of the bear markets since 2018. In 2018, for example, it was discovered that some ICO operators violated the law by selling unregistered securities, which drew the attention of the SEC.
However, a year later, with the outbreak of the pandemic, cryptocurrencies were anticipating record growth, which would reimburse coin holders for their losses.
There have been no protracted bear cycles in the cryptocurrency market since February 2019. By the end of 2020, BTC had nearly reached $30 thousand, and by April 2021, it had risen to $64 thousand.
Strikes in Kazakhstan, one of the world’s main BTC mining countries, caused bitcoin to fall again below $42 thousand at the start of January 2022. The Fed session, which discussed the rise in interest rates, also had an impact on the fall.
Given the current market situation, our editorial team is continuing a unique article cycle dedicated to the bear market. We must emphasize that this is not a guide for trading but just a collection of thoughts and insights from experts and market analysts. If you are interested in this kind of content, please give feedback in the comments below.
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Valentyna Bereza, Team bit4you.