What is a Crypto bear market?
A bear market occurs when market prices are consistently falling, seen in both the Crypto industry and traditional markets such as equities, bonds, real estate, and commodities.
In Crypto, a bear market entails a drop of at least 20% from recent highs for major cryptocurrencies like Bitcoin, while a bull market signifies rising values.
What are some warning signs of a Crypto bear market?
Here are indicators that traders or investors should pay attention to:
- Decreased trading volume: This may signal that individuals are opting to retain their coins due to the market’s unpredictable nature.
- “Backwardation”: When an asset’s futures market price is lower than its current market price, it is termed as being in a state of “backwardation.”
- Death cross: A technical signal called a “death cross” occurs when an asset’s 50-day moving average crosses below its 200-day moving average.
What are the different phases of a Crypto bear market?
Bear markets unfold in four stages:
What causes the Crypto bear market?
Bear markets often precede or follow economic recessions.
Investors gauge economic health by tracking indicators such as hiring, wage growth, inflation, and interest rates.
During the COVID-19 pandemic, unique symptoms, including widespread closures, high unemployment, and social distancing measures, jeopardized the economy.
Anticipating a decline in corporate profits during an economic downturn, investors sell stocks, leading to market declines and lower prices.
A bear market can signal future challenges, including heightened unemployment and difficult economic conditions.
What is an Indicator?
Indicators are signals evaluating a program’s alignment with its goals.
Project progress is tracked using realistic metrics known as indicators, established pre-project to monitor goal achievement.
Indicators bridge theory and practice in project planning.
They serve as tools to assess the impact of efforts, reflecting observable changes connected to the project intervention.
They provide evidence of outputs, immediate effects, or long-term changes.
Also read: How do crypto exchanges make money?
Top 3 indicators of Crypto bear market
1. 200-Day Simple Moving Average
Traders globally favor the 200-day simple moving average (SMA) as a key indicator.
A daily close above the 200-day SMA signals the conclusion of a bearish trend, with a more prolonged stay indicating a stronger signal.
2. RSI Oscillator
The Relative Strength Index (RSI) is a useful indicator for gauging buying and selling pressure.
Longer time frames offer more significant RSI reversal signals.
A weekly RSI breaking above 50 can confirm the end of a bear market in a more measured manner.
3. Moving Average Multiplier
The 4-year SMA, tracking the halving cycle, serves as an indicator for a bear market bottom.
Crypto investors find the 48-period SMA on the monthly chart reliable.
Whenever Bitcoin’s price dipped below the 48-SMA before rebounding, it signaled the end of the bear market.
Final thoughts
While it can be difficult to predict precisely when the bear market will end, you can make a more accurate prediction by looking at previous bearish cycles and price bottoms.