Sun. Jun 23rd, 2024

How To Earn In A Crypto Bear And Bull Markets.

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Crypto ecosystem thrives on the fundamental aspects of financial market trends. We can define market trend as the overall direction that an asset or a market is going. As such, market trends are closely watched by both technical analysts and fundamental analysts.Bull markets tend to be relatively straightforward to trade, as they can allow for some of the easiest trading and investment strategies. Even inexperienced traders may do well in really favorable bull market conditions. With that said, it’s also crucial to understand how markets move in cycles.

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So, what should you know about bull markets? How can traders take advantage of bull markets? You will learn that soon.

What is a bull market?

A bull market (or bull run) is a state of a financial market where prices are rising. The term bull market is often used in the context of the stock market. However, it can be used in any financial market – including Forex, bonds, commodities, real estate, and cryptocurrencies. Besides, a bull market may also refer to a specific asset such as Bitcoin, Ethereum, or BNB. It could even refer to a sector, such as utility tokens, privacy coins, or biotech stocks.

You may have heard traders from Wall Street use the terms “bullish” and “bearish.” When a trader says they are bullish on a market, it means that they expect prices to rise. When they are bearish, they expect prices to decline.Being bullish can often mean that they are also long that market, though that may not necessarily be the case. Being bullish may not necessarily mean that a long trade opportunity is present right now, just that prices are rising or are expected to rise.It’s also worth noting that a bull market doesn’t mean that prices don’t fall or fluctuate. This is why it’s more sensible to consider bull markets on larger time frames. In this sense, bull markets will contain periods of decline or consolidation without breaking the major market trend. Take a look at the Bitcoin chart below. While there are periods of decline, and a few violent market crashes, it has been in a major uptrend since its inception.

How traders can take advantage of bull markets

The main idea behind trading bull markets is relatively simple. Prices are going up, so going long and buying dips is generally a reasonable strategy. This is why the buy and hold strategy and dollar-cost averaging are generally well-suited for long-term bull markets.There’s a saying that goes like this: “The trend is your friend, until it’s not.” This just means that it makes sense to trade with the direction of the market trend. At the same time, no trend will last forever, and the same strategy may not perform well in other parts of a market cycle. The only certainty is that the markets can and will change. As we’ve seen with the COVID-19 outbreak, multi-year bull markets can be wiped out in a matter of weeks.Naturally, most investors will be bullish in a bull market. This makes sense since prices are going up, so the overall sentiment should also be bullish. However, even during a bull market, some investors will be bearish. If their trading strategy accommodates for it, they may even be successful with short-term bearish trades, such as shorting.

As such, some traders will try to short the recent highs in a bull market. However, these are advanced strategies and are generally more suitable for professional traders. As a less experienced trader, it’s usually more sensible to trade according to the trend. Many investors get trapped trying to short bull markets. After all, stepping in front of a raging bull or a locomotive can be a dangerous undertaking.

The Bear Market.

A bear market is a falling or crashing market. So if you are bearish, it means you think the price of an asset or market will go down. And if a news item is bearish for a cryptocurrency or for the market, it’s seen as something that will drive prices lower.

After a record-breaking rise for Bitcoin for most of 2021, from $29,300 to start the year to as high as $64,800 in mid-April, the succeeding 60 days up to mid-June mostly wiped off those gains in a massive market correction. As of June 15, BTC returned to above-$40,000 levels, the first time it had done so in the past 25 days, signifying the swiftness of this particular downfall and the potentially long way out of it. And on November 10, 2021, The price of bitcoin has hit a new all-time high amid a record-breaking rally that has seen it double in price since July. The cryptocurrency reached above $68,500 for the first time in its history, marking gains of more than 350 per cent over the last year. And in the middle of January bear market wiped out near half of the market gain bringing down the price of Bitcoin to $32,000.

How to Survive A Crypto Bear Market Situation.

Even in negative market environments, seasoned traders can give you several tips to survive in bear market situations. Some of these tips are general trading principles, while others are special features available in exchanges that offer comprehensive services, like Binance. 

  1. Buy the dip. One of the most commonly cited mantras in cryptocurrency trading, buying the dip means taking advantage of low prices as good entry points in a bearish market. The expectation behind this move is that with prices falling down to a certain point, it will only be a matter of time before prices recover and you get a good profit. However…
  2. Avoid being cut by the falling price. There’s a fine between identifying a true bottom in prices and trying to “catch a falling knife,” or buying a rapidly declining asset close to its recent bottom in anticipation of a quick recovery. Beware that in most cases, these falling knife moves end up hurting your portfolio more. As with any trade, proceed with caution.
  3. Explore other crypto-earning method. There’s more to earning profits in crypto than just trading. Especially in periods when trading doesn’t yield the same returns it used to, crypto earning services such as Binance Earn can give you an alternative way to grow your portfolio. Stake your cryptocurrencies, you’re not trading them much anyway while you wait for markets to recover. Then, you’ll see your assets grow by annual percentage yields (APYs) of up to 20% for ETH 2.0 Staking and 9% for BNB staking, among many other crypto yield rates that are way better than what they offer at the banks. 
  4. Refine your trading strategies. As bear markets provide numerous low entry points to start your journey, it pays to use this period to refine your preferred trading strategy, whether you’re a hyper-focused intraday trader or just someone who positions investments every now and then. Come bull market time, you will be more prepared to make your moves with more confidence. 
  5. Buy stablecoins. Let’s face it: most crypto traders still measure their crypto trading gains and losses through their worth in fiat, whether through the dollar or their local currencies. Hence, in a bear market, it can be prudent to consolidate some part of your crypto portfolio into stablecoins to exit from potential losses. Then, you can convert more of your fiat holdings into stablecoins to prepare for whenever the market enters recovery.

Conclusion

There are other factors that might determine the price in crytpo market, a speculative utterances from a big market Influencer as it was the case of 2021 with Elon Musk and Donald Trump, can sharply make or mar market prices. The onus is invest with an amount you can afford to avoid losing your life savings. Crypto market is volatile, do your Due Diligence Research before investing.

Reference:

Binance;(2021) Bear market and bull market

CBNC : (2022)The Risks For Bear Market

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