In its history, the Crypto market has experienced multiple severe bear markets, but each time, it has become more assertive. To better understand the signs of change in the present bear market, you need to examine the same technical indicators that were most successful in predicting price bottoms during the previous bearish cycle.
But, before we learn about these indicators, let’s get an overview of a Crypto bear market and what indicators are. Let’s get started!
What is a Crypto bear market?
The term bear market is a market condition when the market’s prices are trending downward. It is frequently used in the Crypto industry and conventional markets like those for equities, bonds, real estate, and commodities.
A Crypto bear market is one in which the price of significant Cryptocurrencies, like Bitcoin, has dropped by at least 20% from recent highs and continues to decline. On the other hand, a Crypto bull market is one in which the value of significant Cryptocurrencies keeps increasing.
What are some warning signs of a Crypto bear market?
The following are some red flags that a trader or investor should be aware of:
- Lower trading volume: This could mean that people have started holding their coins because of the unpredictability of the market.
- “Backwardation”: When an asset’s price in the futures market is lower than its current market price, this is known as “backwardation.”
- Death cross: The 50-day moving average of an asset crosses the 200-day moving average to form a technical indication known as a “death cross.”
What are the different phases of a Crypto bear market?
Bear markets typically consist of four different stages:
- High prices characterize the first phase. Investors start to exit the markets and collect profits after this timespan.
- In the second phase, previously positive economic indicators degrade along with asset prices and trading activity falling. Some investors feel panic as the situation starts to get worse; this is referred to as capitulation.
- Speculators enter the market in the third phase, driving up prices and trade volume.
- In the fourth and last phase, Crypto falls once more, but more slowly. Bear markets eventually turn into bull markets as investors return, attracted by lower prices and upbeat news.
What causes the Crypto bear market?
A bear market frequently occurs before or after an economic recession. Investors assess the state of the economy by closely monitoring key indicators like hiring, wage growth, inflation, and interest rates. In the COVID-19 pandemic, numerous symptoms were subtly different, and the economy was in peril due to multiple closures, unemployment figures, and social distancing measures.
Investors foresee a significant decrease in firm profits when they observe an economy in decline. As a result, people sell their stocks, which lowers markets and decreases prices. A bear market might predict increased unemployment and challenging economic conditions in the future.
What is an Indicator?
Indicators are hints, cues, or markers that assess one area of a program and reveal how closely aligned it is with its intended course and results. Realistic and quantifiable metrics for project progress are known as indicators. They should be established before the project begins and enable us to monitor or assess if a project accomplishes the goals it set out to achieve—the connection between theory and practice in project planning that is formed with the help of indicators.
An indicator is a tool that enables you to determine whether your efforts are having an impact. Indicators often reflect occurrences or changes that may be seen and are connected to the project intervention. They offer proof that something has occurred, whether it be an output supplied, an instantaneous effect that transpired, or a long-term change that was noticed.
Top 3 indicators of Crypto bear market
#1 200-Day Simple Moving Average
The most significant moving average adopted by traders and investors worldwide is the 200-day simple moving average. Often, the 200-day SMA will break and close above on a daily basis to indicate the end of a bearish trend. The stronger the signal, the longer the price of an asset stays above the 200-day SMA.
#2 RSI Oscillator
Another helpful technical indicator that can assist investors in determining the buying and selling pressure is the Relative Strength Index (RSI). Longer time frames typically provide more vital RSI reversal indications.
For a more measured approach, the end of a bear market might be confirmed by a weekly RSI break above the 50 mid-level.
#3 Moving Average Multiplier
The 4-year SMA, which monitors the 4-year halving cycle, is another indicator of a bear market bottom. Using the 48-period SMA (4 x 12 months) applied to the monthly chart is preferable for Crypto investors. Notably, every time the price of Bitcoin fell below the 48-SMA before rising again, it indicated that the bear market had ended.
Final thoughts: When will this bear market end?
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.
To learn some super-effective investing tips during the Crypto bear market, click here!
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn’t represent any investment advice or WazirX’s official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.