It’s finally happening. We’re in a bear market again — time to sell all your crypto assets, burn your wallets, and leave the building before it all catches on fire, right?
No! Every market has ups and downs; just because we’re on a bearish trend right now doesn’t mean it will be like this forever. If fact, if you miscalculate the length of this bear run, you might miss out on huge earnings — but that won’t happen.
This article will cover everything you need to know; how long this bearish run will last, why bear markets happen, and how to make money during these periods.
What is a Bear Market in Crypto?
A crypto bear market is a period when the market prices of crypto assets are falling. They usually last a few months but can sometimes extend over a year.
You may have heard the terms bull and bear market before when it comes to traditional markets and stock prices. A bear market is when the prices are going down for a prolonged period, and a bull market is when the prices are generally going up. Bull and bear markets are part of the natural market cycle, so there’s no need to panic if you find yourself in the latter.
According to Investopedia, a bear market is defined by a sustained price decrease of more than 20% from recent highs — something crypto is no stranger to.
Bear markets typically mean people are losing money, which is rarely good news for investors. Your investments must be careful during bear markets, as prices can drop rapidly. However, there are still opportunities to make money during these periods, if you know where to look.
How Long Does a Crypto Bear Market Last?
In general, a bear market lasts around four years. Regarding crypto markets, the last three bear runs have lasted between 1-2 years. Here’s an overview (Crypto.com):
Downturn #1 — Shutdowns & Hacks
Between Q4 of 2011 and Q4 of 2012, the crypto market saw a downturn, likely driven by a few factors:
- TradeHill shutdown: after several regulatory issues, TradeHill (one of the early Bitcoin exchanges) was forced to shutter operations.
- Linode hack: Linode is a cloud computing and hosting provider; in 2012, they experienced a breach where users had over 46,000 BTC stolen from their wallets.
Downturn #2 — Government Takedowns
This downturn took place between Q4 2013 and 2015. While there were security issues with popular exchange Mt. Gox, there were some more notable government policy changes and actions that affected the markets:
- Silk Road takedown: Silk Road was a darknet marketplace where people could launder money, buy drugs, and do other illegal activities. In 2013, the FBI seized $34 million in Bitcoin used to power transactions on the platform.
- China bans Bitcoin transactions: In 2013, the Chinese government banned financial institutions from handling Bitcoin transactions.
Downturn #3 — Hacks & Hikes
The third crypto bear run was between 2017 and 2018, and can largely be attributed to two key events:
- Coincheck hack: Coincheck is a Japanese crypto exchange that lost $500 million worth of NEM to hackers in 2018.
- US Federal Reserve interest rate: The central reserve in the US (called the Fed) will raise or lower interest rates to control economic growth. In 2018, the Fed increased interest rates four times to reduce spending.
Downturn #4 — Present Day
While it’s hard to pinpoint any single reason for the current bear market, we can probably blame the recession happening in every market. Post-COVID market corrections affect most financial markets, and crypto is no different.
Factors that Affect the Length of Crypto Bear Markets
Markets respond to the actions and beliefs of the people within. Anything that makes people optimistic about crypto would end a bear run early; the reverse is true for extending the downturn.
Government Regulations & Actions
Governments can help influence how long a bearish market lasts through several mechanisms:
- Accepting cryptocurrency as legal tender, as the Central African Republic and El Salvador have done, would likely increase interest in crypto again.
- Lowering interest rates encourages more borrowing and spending, so central banks can lower the barriers to entering the crypto markets.
Conversely, regulators can extend a bearish market by doing the opposite; banning crypto transactions, raising interest rates, creating taxes on cryptocurrency, etc.
Interest from Institutional Investors
Hype fuels the majority of the market dynamics for cryptocurrency. When digital asset prices go up, everyone wants in on the action. The crypto markets became overheated in 2017 because of expectations that institutional buyers would enter the space en masse.
We saw a market correction when those investments failed to materialize as expected. We’re seeing a similar story play out now; until big money starts flowing into crypto again, it’s unlikely we’ll see sustained growth.
Crypto Market Security
People are highly unlikely to invest in something they do not trust. For crypto to mature as an asset class, we need to see increased security measures across exchanges, wallets, and other infrastructure. This will instill greater confidence in potential investors and help bring the markets out of a bear run.
In crypto, FUD stands for fear, uncertainty, and doubt. This refers to the negative sentiment circulating about crypto, causing people to sell off their assets.
In a bear run, we often see more FUD because people are looking for any excuse to get out of the market. As crypto becomes more mainstream, we should see less of this kind of speculation and shorter bear markets.
How to Make Money in a Crypto Bear Market
The most obvious way to make money in a bear market is to trade crypto assets. If you believe the market will rebound, you can buy assets at a low price and sell them when the market recovers. This strategy is called “buying the dip.”
You can also short assets, which means selling them now in the expectation that you’ll be able to repurchase them at a lower price later. This is how many professional traders make money in bear markets. Once a feature of traditional markets, this trading instrument has made its way over to crypto.
Alternatively, you can leverage options trading to take a long or short position without putting down as much capital. Options give you the right to buy or sell an asset at a set price in the future.
Staking & Lending
Another way to generate revenue during a bear market is to stake or lend your crypto. Staking is when you hold crypto in your wallet to help secure a network (similar to how miners are paid in crypto).
Lending is when you loan crypto to someone else, usually through a platform like Celsius Network, and earn interest on the loan. Both of these methods allow you to generate income without having to sell your crypto assets. (These are also great ways to diversify your crypto strategy in a bull market).
‘Hodling’ is a crypto term that means holding onto your assets for the long term. The thinking is that even though the market may be down now, it will eventually recover, and if you hold onto your assets, you’ll be able to sell them at a higher price later. This method requires patience and discipline but can be profitable if timed correctly.
While it may sound counterintuitive initially, crypto volatility can provide a huge opportunity to generate passive income. We cannot be certain that a given coin will go up or down — all we know is that it will move. Fortunately, that ‘wiggle’ is something you can take advantage of; if you buy a coin every time it’s down, and then sell it again when it goes up a certain amount, you will make a profit.
While it may not be a considerable margin (maybe $0.20, $0.30, $0.40), if you make enough of these transactions during the day, the micro-profits will quickly stack up. This strategy is known as grid trading, and stock traders have done it for years. If you’d like to learn how to apply this to crypto, check out Dan Hollings’ ‘The Plan’ for more details!
You can set up a crypto mining operation with the right technical know-how. This involves verifying crypto transactions and adding them to the blockchain in exchange for a reward (usually crypto). Mining is a great way to generate revenue during bear markets because it doesn’t require selling your assets, and you can often mine with equipment you already have.
Investing in ICOs
Another way to make money during bear markets is to invest in ICOs (initial coin offerings). These are similar to IPOs in the stock market, and they can be very profitable if you choose the right project.
The key is to do your research and only invest in ICOs with a strong team, a good idea, and a clear use case. If you can find projects like this, you can make money even when the markets are down.
Ride Out The Bear Market With Confidence
Bearish markets can be tricky, but there are ways to make money even when prices are down. The key is to have a strategy and stick to it.
- Crypto bear markets can last anywhere from a few weeks to over a year. Historically, they last 1-2 years.
- The key factors influencing how long a bear market lasts are government regulations, interest from institutional buyers, and market sentiment.
- There are several ways to make money during a bear market, including trading, staking & lending, hodling, and investing.
Curious to learn how some investors are making money using crypto in a bull OR bear market? You might be interested in The Plan. Developed by marketing genius Dan Hollings, you’ll learn how to take advantage of crypto volatility to make passive income. Sign up today to learn more!
Frequently Asked Questions
Are we in a bear market in 2022?
It’s hard to say, especially regarding crypto (where volatility is very common). While crypto prices have been down in recent months, it’s difficult to predict the market’s future. However, given the recent downturn in traditional financial markets, it’s likely that crypto is feeling something similar. Market conditions are bearish, but a bull market is over the horizon.
Is the crypto market bullish or bearish?
The crypto market is notoriously difficult to predict. However, given the recent price downturn of digital assets, it’s safe to say that the market is currently in a bearish state. The crypto market trends upwards often (at least in the case of big players like Bitcoin and Ethereum), leading many to call it a bull market. However, crypto market cycles are newer and less predictable, so this may not be the correct assessment.
When will the crypto bearish market end?
Some experts believe the current bear market may last until late 2022 or early 2023. As far as bull markets go, crypto has experienced some of the most dramatic bouncebacks — expect an upturn soon.