The Bullish Bear Market
In my first inaugural post on Publish0x (thank you for the acceptance!), it only feels right to take a step back and look at the big picture of crypto against the backdrop of this current bear market. I say current bear market because this is not the first time the cryptocurrency has gone through one and probably won't be the last. In fact, if you delve into the history of this new asset class, there have already been a few 4-year cycles where cryptocurrency has gone through both amazing bull markets and nasty bear markets. Although the world feels like it's ending and the market will eventually drop down to zero, understand that this isn't the first time it's happened. As much as analysts, hosts, and the news in general make you feel like you need to run for the hills, it's all part of the plan. Through observation and my experience of current events, I want to share why I feel (and why you should too!) bullish right now about this space as a whole.
The Bull-Bear Cycle: Bear Markets Are Normal
This is not just true of cryptocurrency markets, but of markets as a whole. From real estate, to stocks and bonds, to used cars, there's always what they call a boom-and-bust cycle. It simply means there's a period of time in that market where prices for those assets shoot up (the BOOM) and a period of time where prices for that asset go down (the BUST). But what causes it? It's due to a concept you may have heard a little bit about: fear and greed. When investors like us buy assets we like or think will go up, it means there will be less of that asset to go around for others to buy. Due the concept of supply and demand, when there is less of that asset to go around but people still want to buy it, the price will keep going up until the number of people that want to buy that asset goes down. The process of the price going up until the number of people that want to buy it goes down, is exactly what the bull market is.
As prices go up, people not invested in that market start to get interested and feel like they can make money. This is where greed enters the market. People feel like if they buy now then wait to sell later, they'll make some good money. Prices are shooting up, this thing is hot, and they can just ride the wave. Everything should be alright, right? (Doesn't this sound like what happened in the bull market back at the start of 2021?) Well, sometimes. As the price goes higher and less people are willing to buy that asset, it reaches a point where it can go higher no more. Why? Because not many people are willing to buy at those high prices. And then you have to think about this too: those who bought the asset at much lower prices are closely watching what's going on. As the number of people willing to buy that asset at high prices shrinks, the price change starts to go flat.
So if Bitcoin for example, jumps from $15,000 to $69,000 over 5 months, then stays at $69,000 for 6 months, there might be a problem. The price being flat means that there aren't enough people willing to buy Bitcoin over $69,000 than people selling it. The switch is when those who bought at lower prices understand what's probably going to come next: a big drop in price. So knowing that, these people finally begin to sell and the price really will drop. As the price drops, fear begins to enter the market. People will want to protect the money they've made, so they'll try to sell before the price drops even further. This is what creates a nasty cycle.
As more and more people start to see what they invested drop, they'll try to get out before it's too late (Doesn't this sound like what's happening now in this bear market from the end of 2021?). This is where fear enters the market. The price keeps dropping as more people try to get out, analysts start saying the asset is crashing and will never be the same, the news picks up on the fear and spreads it around by constantly reporting on it. This process is exactly what the bear market is...but there is good news. There is a silver lining!
The silver lining is this process is going to start all over again. The problem here though, is most people don't understand what part of this continuous cycle they're in. Right now, we are clearly in a bear market. The news about cryptocurrency is negative. Most analysts are speaking negatively about cryptocurrency. Over the past year, cryptocurrency prices have dropped by 60-99 percent! Now I ask you this: if you know the bull & bear market cycle is going to start all over again, when would you want to buy? In the middle of the bear market when prices are dropping or the middle of the bull market when prices are going up?
While lots of people would buy in a bull market when prices are going up, the better thing to do is buy in a bear market when prices are going down. Why? Because the lower the price you can buy, the more you will make when the bull market (and the price going up) eventually comes back again. Honestly, the bear market might seem scary and everything may be saying that cryptocurrency is going to crash even further, but don't let the fear get to you. Fight it and understand that this part of the cycle is closer to the end than the beginning. Stay smart and understand that this is where good money is made and don't let the noise stop you from getting into one of the best opportunities out right now.
