LLTS 101 — How to Spot a Bear Run?
Let’s learn together small indicators of bear run, and how to know if a bear run is ongoing!
A crypto bear run could be hard to foresee before it happens. It does, however, usually go along with extremely optimistic moments. When supply exceeds demand and market performance falls short of recent highs, a bear market is in progress. During a bear market, many investors are less eager to invest their money, and many others hang onto what they have because they believe there will be more suffering to come. When a downturn lasts for a long time, trading volume and liquidity are often lower than they are in bull markets. A crypto bear run has many of the same drawbacks as a bull run, albeit it is more unpredictable and prices may fall much further.
How to Spot Bear Runs
When the price of crypto is down, many investors refrain from making purchases. As a result, in order to properly manage their investment choices, people need to understand how to spot a bear run by trying to spot for:
A Sudden Downfall in Trading Volume — Excessive worry and pessimism can lead to less activity in the crypto sphere. During a crypto bear run, when investor confidence declines, trading often plummets. Some investors may attempt to sell their holdings despite this to limit further losses.
Investor Uncertainty — Anxious investors trade less frequently. A crypto bear run is followed by a decline in confidence in several different currencies. The stablecoin market cap may increase during a bull run in cryptocurrency since more investors are minimizing their risk by converting to them.
Adverse Market Conditions — Because confidence is influenced by economic stability and trading volume is influenced by the availability of funds, unfavorable macroeconomic conditions may induce a bear run in cryptocurrency markets. In the past, declines in the cryptocurrency market have been accompanied by a combination of yield curve inversions, rising inflation, and higher interest rates.
High Volatility and Low Liquidity — Stock prices are more erratic during bear runs, with significant daily price swings. However, liquidity is frequently constrained since there aren’t as many buyers prepared to buy the assets.
How Long Do Bear Runs Last?
It is challenging to forecast how long each run will last. The crypto market slump, on the other hand, might linger for years before making a significant comeback, just as it did, following the 2017 bull run. In fact, some investors came up with the phrase “crypto winter” to characterize these protracted bearish trends.
The Bottom Line
Despite market turbulence, crypto development has been moving along quickly. Although bear markets and crypto winters will persist in the future due to volatility and other factors, investors may take a number of steps to weather the current bear market in cryptocurrencies and perhaps even benefit from it.
