In the investing world, the terms “bull” and “bear” are often used to describe market conditions. These terms describe the way things are in stock markets in general, that is, whether they rise or decline.
For you as an investor, market direction is the main force that has a huge impact on your portfolio. Therefore, it is important to understand how each of these market conditions can affect your cryptocurrency investment.
What are bull and bear markets?
Bull markets are defined by aggressive market growth over a period of time. As the market starts to grow, people in the stock market become greedier. You can see more and more of them thinking, “Oh yes, let’s invest in the market because it is growing.”
The definition of a bear market is the exact opposite of a bull market. It is a market that, quarter after quarter, goes down by about 20 percent. This signals a bear market, and when this happens, people become afraid to invest in the stock market.
What are the advantages of a bear market?
It is important to remember that a bull market is characterized by a general sense of optimism and positive growth, which tends to stimulate greed. A bear market is associated with a general sense of decline, which tends to strike fear into the hearts of shareholders.
[ Life Hack ] When it comes to bull and bear markets, savvy investors often act differently from the investing public and capitalize on their emotions by finding quality stocks at low prices during bear markets and selling these stocks in bull markets after their value has recovered.
Cryptocurrency traders and investors gradually shift from fearing a market crash to hoping for the fast growth of bitcoin and other coins. The bull trend, in other words, a rapid rise in the price of an asset, is the best time to make money in the blockchain industry. However, mistakes are possible even during a bull run.
What mistakes do investors make in the bull crypto market?
1. Belief in the hype. Due to the hype in the media, an investment bubble often appears, which makes cryptocurrency jump in price. As a result, long-term investors sell to make huge profits, leaving other investors with stocks that will not be profitable.
2. Using the wrong exchange. It is a simple one. However, many investors choose an exchange without learning more about its fees or practices. High fees mean lower profit margins. As an investor, you want to look for safe exchanges with low fees to make your portfolio more profitable.
3. Security. A recurring problem is that investors trust “exchange wallets” and simply store their assets on exchanges. While reputable exchanges have a long history of protecting investor funds, online systems are never this air-tight. They can still be used, and hackers are always eager.
4. Short buys and sells. The cryptocurrency market attracts many amateur investors. This means that many people sell very quickly because they are nervous about price fluctuations.
5. Don’t read cryptocurrency charts. Understand the market you are trading in — learn as much as you can from the start, and then increase your knowledge as you go. In the world of cryptocurrencies, the expression “knowledge is power” is more relevant than ever.
How to avoid these mistakes
Taylor Monahan, the co-founder of MyCryptoWallet and MyEtherWallet, tweeted some helpful tips from her previous bull run in 2017. We have created this list for you based on her advice:
- Don’t chase every new “promising” coin. Choose coins for investing deliberately, conduct market analysis. Don’t invest only by following the advice of others.
- Don’t seek to make money only by selling coins at their short-term peak. Moreover, it is worth transferring 90-95% of your capital to cold storage for a long time. You will only be successful when you learn to generate a stable return on investment.
- Transfer your cryptocurrency funds to your secure hardware wallet and only connect it when you need to complete a transaction. These relatively inexpensive security measures allow you to invest with confidence and without worry.
- Invest in cryptocurrencies only the money you are mentally ready to lose. That is, you should not take a loan or spend all savings on investments. In the long term, this strategy will only lead to losses and debt.
- Good exchanges will focus on ease of investing, using clear charts, and tracking trading prices as close to real time as possible. They will also work to keep fees fair and as low as possible while maintaining the integrity of their platform’s security.
The first priority for traders and investors is to preserve their equity. Don’t play with margin trading if you are not familiar with its basic principles. Determine for yourself a strategy in which even dozens of unprofitable trades will not make you bankrupt.
The key to success in the cryptocurrency market is the ability to cope with your emotions. It is the emotions that get in the way of getting rid of assets at the peak of their rates and force people to buy coins after they have overcome their maximum. In any situation, it is worth thinking twice. What is more, all contemplation should be supported by your own research.