As Bearish Trends Control Crypto Market, Here's What Investors Should Do Until It Recovers
Thorough research, diversifying portfolios, and small investments appear to be the most logical solutions.
All financial markets are cyclic in nature, filled with their share of crests and troughs. The crypto market is passing through one such bear cycle now. Most cryptocurrencies have lost their value in the past two quarters. Bitcoin (BTC) has lost nearly two-thirds of its value when we benchmark the price from its all-high in November 2021 to current prices. It is not only the case with BTC, Ethereum (ETH) has also dipped significantly. The same was replicated across the rest of the market. 2022 has been a bit tough for the crypto market for multiple reasons.
Why is the crypto market on a bearish trend in 2022?
Even though the cryptocurrency market seemed to be consolidating in April, it only started to fall in mid-May.
These bearish sentiments could be attributed to a few key factors. It all began with the increasing uncertainty around the new COVID variants across different nations.
In January, people started to hold themselves back from investing or trading crypto. In February, the Ukraine-Russia crisis halted the rally of cryptos. At the same time, the biggest hit was the collapse of the stablecoin Terra, which wiped out nearly $50 billion from the market.
This event was followed by the liquidation of the hedge fund, Three Arrows Capital, and the troubles associated with Celsius. Soon after, the Singapore-registered crypto exchange, Vauld, paused their withdrawals.
These series of events have created anxiety among the market participants entering the market. Additionally, the US Federal Reserve's hiking interest rates have resulted in investors and traders moving away from riskier assets.
With inflation shooting through the roof and an overwhelming fear of recession growing, there were extreme bearish sentiments across the market.
When will the crypto market recover?
The current bear market sentiment has affected most cryptocurrencies to fall below their average trading levels. However, this is not the first time the crypto market has crashed.
We have all seen each crypto rise and fall for a brief time now. So, the market will arguably recover and bounce back stronger, but it would be too early to anticipate a bullish trend considering a series of macroeconomic events.
However, the two significant factors that potentially impact the crypto market's recovery are governmental policies worldwide and interest rate policies. It might take some time for governments to develop friendly regulatory policies, as it is comparatively a new market.
If — and only if — the inflation is under control, it would reduce the interest rates. Hence any optimistic change in these factors can be a turning point for the entire cryptoverse.
Also, with crypto adoption increasing day by day, more individuals and institutions are coming forward to buy the market dips. So, prospects for growth are definitely around the corner.
Since the crypto market does not have a long history, it cannot be easy to predict market movements. Hence, we must wait and watch as the market corrects itself and regains its momentum and speed.
What should investors do until the crypto market recovers?
> Investors wanting to buy the dips should do their own research thoroughly and then enter the market.
> If investors are bullish on the cryptocurrencies they are holding to; they should keep doing that for the best results in the future.
> It is always a good idea to diversify your portfolio rather than putting all your eggs in one basket.
> For novice investors, it is suggested not to indulge in any aggressive buying activity. As a golden rule, novice investors should not invest more than they can afford to lose.
> Since the market is down, the crypto-curious can experiment with investing small amounts in crypto.
> Market participants would observe the market movements closely.
(The author is the CEO and co-founder of Mudrex, a global crypto investing company.)
Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.
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