The Diary Game 18/09/2021 - Bear Market: What It Is And How To Invest Correctly.
The year 2020 had a negative impact on all markets in the financial sector globally. It seems that some investors have not yet managed to learn from the technological bubble of 2000 or the financial crisis of 2008 how it is right to invest in a bear market. Although 2020 was the year in which Bitcoin and the other cryptocurrencies proved their usefulness and the purpose for which they were created was finally understood, many investors are scared and choose not to invest in the bear market.
In order to make the right investments, it is necessary to understand what the specific terms of the crypto market mean and why we must beware and especially in which cryptocurrencies of the future to invest.
The term has been known to stock market investors since 1712 when the author of a book created two characters. The "negative" character was the bear. Cryptocurrencies and technical analysts say that Bitcoin has been in a macro bull trend since its inception. However, in their existence, there have been many bear-type events in the digital currency market. These events bring decreases of over 80% for Bitcoin and 90% for altcoins. But what is a bear market? It is an open market as it is declining. The bear market is risky and difficult to trade for beginners. Upward movements are slow and steady, while decreases are sudden and violent. When the price starts to fall, many traders panic and rush out of the market.
As I mentioned, investors believe that Bitcoin is in a macro bull trend. Does that mean there are no bear markets? Of course there is. An example is 2017 when, after a record high of $ 20,000, it had a brutal bear market. Another was in 2014 when Bitcoin fell 86%. Even in 2020 Bitcoin fell below $ 3,000, recovering rapidly a few days later.
In general, in a bull market prices increase, while in the bear market they decrease. One of the differences is consolidation. In the bear market there are times when market volatility is quite low and there are few trading activities. This moment of low volatility is also felt on the bull markets, but the behavior of people or traders is felt more in periods of decline.
Bulls are traders who play for growth. They buy during this period, because they expect their assets to grow. This phenomenon is called "long term investing" or "long term", ie people who invest long term or open long term positions. When their terms are met, meaning the price of the currency will rise, they will close the position by selling.
Bears, on the other hand, play for drop. They consider the markets too big and want the price to be reduced. Therefore, they do the opposite, that is, they sell or open short-term positions. After a while, they close their positions and buy the shares sold at a lower price.
As I specified, a Bull investor wants the market to grow in the future and is basically looking to buy, while a Bear is looking to sell. Bulls need to be careful, because the market can be oversaturated and in this case a recession is inevitable. The bears instead are waiting for the mentioned recession. On the bear market it is difficult to find a stock in which to invest profitably. But there are special techniques and strategies that you can apply when the market is falling.
Another way to invest correctly in a declining market is the short selling technique. Borrow shares, sell them at a high price, then buy cheap and repay the debt. This translates to going with the market trend.
In conclusion, when the market is in a downward trend, it is safer for you to change the investment in stablecoin or to keep the investment. Even if you are in theory minus, as long as it is not converted to BTC, the amount you have is not a loss. Wait for the market to recover. If you can, you can buy Bitcoin at a lower price, selling only half the amount you have. The great analysts of the crypto market consider that when the market is declining, it is like a promotion, a discount in which you have the possibility to buy at a lower price, a larger quantity.
I’m not a certified financial planner/advisor nor a certified financial analyst. The contents on this post are for informational purposes only and does not constitute financial, accounting, or legal advice. Do your own research, take your own decision.
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