Is Crypto hitting the Bear Market?

A bear market is when a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment. Bear markets are often associated with declines in an overall market or index like the S&P 500 and also may accompany general economic downturns such as a recession.

With inflation and tightening liquidity placing extreme pressure on the over-leveraged crypto ecosystem, the cryptocurrencies Bitcoin and Ethereum both have traded below their previous cycle all-time highs, a first in history, markets have plunged a great proportion into unrealized loss with all 2021-22 investors now underwater.

The cryptocurrency bear market cycle is the inverse of a bull market. It is characterized by significant price drops in cryptocurrencies that can last anywhere from a few days to several months and then a prolonged period of bearish market sentiment afterward. A bear market can have a variety of effects on your investments.

It's the first time that crypto and Web3 have existed in a macroeconomic bear-market environment, where there’s potentially a recession happening next year. If you are a long-term Hodler, this might not be a good time to liquidate all of your tokens.

Actually, the bearish market usually presents good buying opportunities. Warren Buffet-the world's most famous billionaire used to buy cheap stocks with strong earnings and long-term growth potential. So, don't be alarmed, and keep an eye on the long term.

For the past few months, the crypto markets have been in a bearish mode. Most cryptocurrency prices have been falling, and many people are selling their coins out of fear that they will never recover. However, when the market is in a slump, it is the best time to buy a cryptocurrency for the long term.

Many investors are employing this strategy at the moment because they believe that prices will recover at some point in the future. Even if you are not an investor, you may want to purchase a cryptocurrency now if you believe that prices will rise in the future.

There's a school of thought that says if investors believe prices will recover, they're probably correct. Others may argue that people shouldn't invest based on this belief. The best thing is to diversify your cryptocurrency portfolio, various cryptocurrencies will experience both larger and smaller drops. For instance, Bitcoin and Ethereum have dropped by 70 and 80% respectively from December 2021 to June 2022 while LEO has risen modestly by 84% from $3.2 to $5.9. In a nutshell, do not put all of your eggs in one crypto basket.

There are over 18,000 cryptocurrencies to choose from; not all will be winners, but not all will be losers either. The Bear markets serve as a good reminder to risk management, limiting the amount of risk we take.

That means invest only with money you can afford to lose, so you're never forced to sell at a loss. It also helps to ensure that crypto-only accounts for a small portion of your investments. Having a diversified portfolio means that if one type of asset performs badly, it won't spell financial disaster.

Dr. Deepak Kumar Sahu, President & CEO, VARINDIA