5 Investor Tips on How to Spot Potent Crypto Coins in a Bear Market
Once as a novice trader, I was advised time and time again to avoid trading in a bearish market. For those who do not understand, a bearish market is one in which there is a downward plunge in the price of cryptocurrencies and its characterized by unhealthy devaluing of the worth of these assets.
Bearish markets are induced by a variety of factors of which government influence, unfavorable news and the role of cryptocurrency exchanges are part. There is no time range or a defined timeline for a bear market to be revitalized but the volatility of digital currency often creates frequent swaps between bearish and bullish conditions respectively.
Starters may still stay clear trading under bearish market conditions but it is very possible to trade profitably under bearish conditions. This article is a guide to five things to watch out for that would help guide in choosing the right coin to trade, especially if looking at altcoins outside of bitcoin.
Market capitalization is simply defined as the current share price of an asset multiplied by the total number of existing shares. If for instance the price of an altcoin plunges to $2 from $4 and there are 10000 of such coin in circulation, the market cap of such a coin would be $20,000 instead of $40000. As estimated, in a comprehensive bear market, there is a decrease in the price of most cryptocurrencies which affects the market capitalization of such cryptocurrencies.
Usually, actors in the crypto trading sphere can manipulate price fluctuations in any direction using the market cap. Most cryptocurrencies maintain their value by releasing more supply of the coins in the case of price fall. It is worthy to understand that coins with small market caps are more susceptible to more drastic price falls than those with large market caps. So always look for coins with an acceptable market cap.
Trading volume is an invaluable indicator that can help make informed trade decisions in a bearish market. Trading volume also provide an indication to price actions and helps the crypto trader decide whether or not to buy a particular coin. Almost all cryptocurrency exchange provides information about the trading volumes of each coin listed and high or increasing trading volumes shows a corresponding price movement and vice versa.
Coins with a steady rise in trading volumes have the right potential to give profit and also, a steady decrease in trading volume is an indication of low activity and traders should stir clear of such coins.
Every cryptocurrency is usually targeted towards specific markets. Bitcoin was introduced to facilitate faster payments and other financial transactions thus removing the hassle involved with traditional banking system. Ethereum was introduced to further improve on the possibilities of financial transactions.
It is wise to consider the market addressed by a coin before deciding to trade it in a bearish market. When you as a trader have coins in mind, check in addition to other things, the projects white paper and use the tangibility of their visions to decide.
Adoption of New Innovative Products
Cryptocurrencies becomes progressive with the frequent introduction of new innovative product or technologies. The volatility of digital currencies anchors on news and events and introduction of new ideas tends to endear investors to such coin thus helping to improve its relevance.
Check for a coin that has a wide network of stakeholder, then you just might land yourself a coin with the potential for future stability fueled by responsiveness and diversified ideas geared towards improving the coin. An active and responsive user community is also an indicator that can guide the choice of a good coin to trade in a bear market.
Trading especially in a bearish market that’s diligence and experience. While these five tips are not given as a recommendation upon which you must act on, you should understand that these are just guides and it may be impossible to have a coin with all five qualities. Trading in this regard should be done with further knowledge gathering as well as the investors discretion.