Many crypto assets, including bitcoin, hit new all-time highs in 2021. However, the entire crypto market has been in serious trouble so far in 2022. Most top assets in the crypto market are down at least 50% since the fall. This has many market commentators wondering if another multi-year crypto bear market is upon us. The bitcoin price has found support around the same levels just below $30,000 that were found during a crash last July, there have been a number of signs that the market became a bit overheated last year. Experiencing a bear market at this point would make sense from an historical perspective. This would follow the four-year cycle of bitcoin and crypto bear markets. The ones that also began in late 2013 and late 2017.
Why is the Crypto Market Changing?
The four-year crypto boom and bust cycle is important. This is because it is known to be related to the Halving Event. This is an event that takes place on the Bitcoin network roughly every four years. The Halving Event is when the block subsidy (newly created bitcoin) that is included in every Bitcoin block reward (the block subsidy plus transaction fees) is cut in half. This halving of the block subsidy creates a supply shock of sorts on the market, as there is now less bitcoin coming onto the market from miners. Additionally, the crypto market as a whole tends to follow the ups and downs of bitcoin as the largest and most important crypto asset, which means Bitcoin’s Halving Event affects all of the other crypto coins and tokens as well.
In the past, bitcoin has seen bear markets begin at the end of 2013. Also, the end of 2017 after experiencing multi-year bull runs. It is possibly a coincidence that the end of 2021 also saw the bitcoin price begin to decline sharply. Or perhaps it is a self-fulfilling prophecy from those participating in the bitcoin market. However, it is definitely a trend worth watching into the future. Currently, the next Halving Event is in estimate to occur on June 13, 2024. The exact date and time is not known yet. This is because block times vary (although they’re intended to occur roughly every ten minutes).
A New Season Means New Types of Crypto Projects
In addition to a lower issuance rate of new bitcoin in each boom cycle, there also tend to be different memes in terms of the main selling points of blockchain technology. Bitcoin has been mostly alone. For example, in the first major bull run (outside of perhaps Litecoin). 2017 saw an explosion in initial coin offerings (ICO) on Ethereum. In the most recent bull market, it was all about non-fungible tokens (NFTs). Along with decentralized finance (DeFi), stablecoins, and Web3, with Ethereum again playing a major role.
Another multi-year bear market is now potentially here. Builders who continue to focus on the most practical applications of blockchain technology will lay foundations for the next bull run. You can find great opportunities in the bear market. Less practical projects that could crash and burn tend to pop up at the peak of the boom cycle. Everyone has been talking about NFTs and Web3 throughout 2022. We will have to see if these trends are able to withstand a potentially-lengthy bear market.
How to Weather the Storm
When it comes to weathering the storm in a crypto bear market, it makes sense to stay away from more speculative projects and stick to the accumulation of coins that have the potential for strong growth over the long term. You should not be looking to make a quick buck. Instead, accumulate blue chip cryptocurrencies, such as bitcoin, during the bear market and plan to see the benefits of buying when everyone else is selling in a few years when the next bull run is potentially full speed ahead after the next Halving Event. But it’s important to remember to average out purchases of crypto assets via dollar cost averaging (DCA), as to not suffer at the hands of placing a large buy order at precisely the wrong time.
Some may find stablecoins to be attractive at a time like this; however, it’s important to remember that it’s easy to miss out on a large amount of the crypto asset market’s potential upside in a situation where you don’t move back out of stablecoins early enough in the next bull run. Additionally, inflation rates are at historic highs around the world. It has been like this for for the past year or so. This means these crypto tokens may not continue to act as the safe havens they once were. This is regardless of when the annual percentage yield (APY) found for stablecoins in various DeFi protocols are being factored into the equation.
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