The Bear Market Cleansing Will Be the Bull Market Catalyst: How to Prep for Bitcoin’s Return
The crypto market exploded back in 2017, announcing itself to the entire world. Until then, the only people who knew what cryptocurrencies are, or that they even existed, were tech enthusiasts and, unfortunately, criminals. However, that all changed in 2017 when the crypto market started seeing massive gains, resulting in extreme price growth and countless new coins emerging all around the world.
Bitcoin itself hit $20,000 in December 2017, which is the highest price it had to this day. While no other coin came near it, they still experienced their own version of this surge, and the market prospered. Unfortunately, it also saw a lot of negative effects, which we will talk about shortly.
This all changed in January 2018, when the bulls withdrew, and the bear market took over. While many were hoping that it will be a short one, the following crypto winter lasted for over a year, and even now, it did not let go entirely. These days, Bitcoin's price is only $4,000, and even that is considered a massive increase, which shows how desperate the crypto community has become.
However, there is an argument to be made that the crypto winter that resulted in a loss of entire fortunes is actually just what the market needed in order to become better. It took a lot from digital coins, but it purified the space, and while there are no record breakthroughs these days, most coins are once again seeing steady growth.
Of Bulls And Bears
If you are new to the crypto market, terms like ‘bulls,' ‘bears,' and alike might be confusing. Simply put, bears are people who tend to sell their coins when they believe that the prices will go down, while bulls are those who are buying the coins and tend to have a more optimistic expectation of the coins' prices.
When more people are buying than selling, the market is called bullish, and in the opposite scenario — bearish. When bulls appear, the prices of coins tend to rise as there is greater demand for specific coins, which typically gives them more value. When people are selling their coins for whatever reason, the prices tend to drop as other market participants do not want to buy the coins if the situation is bad enough that others are willing to sell high quantities of them.
In 2017, the bull run started when more people started buying cryptocurrencies. As a result, many others started doing the same, which once again pulled even more investors to the market. In response, the prices surged. In 2018, on the other hand, the high number of scams, as well as the interference from the regulators, caused many to start selling the coins. This led to a price drop, and the more people sold their coins, the lower their price was, and no one was buying anymore.
Things finally slowed down now, and the market is currently seeing stability, with the number of bought coins being relatively close to the number of coins up to the sale. In fact, there have been several occasions where more people bought cryptos, which led to several minor bull runs in the past month.
How Did The Bear Market Help Cryptos?
With all of this in mind, it is logical to assume that higher prices are better for the marker. If that is true, how is the bear market a good thing?
Well, as mentioned earlier, the thriving crypto sector brought a lot of negative consequences as well. One of the largest negatives was an increased amount of scams throughout the space.
Eliminating Bad Actors
We have mentioned that numerous startups emerged with their own coins, inspired by the investors' willingness to buy pretty much any coin. While many of them were legit new businesses, there were huge amounts of money being transferred every day. As a result, a large number of bad actors were drawn to cryptocurrency as well.
These were hackers who started attacking exchanges, but more importantly, these were also scammers who created fake projects and started tricking investors into buying their coins. Investors were quick to buy, especially new ones, who believed in crypto and did not want to be left behind and miss out on valuable coins. After all, early Bitcoin investors became millionaires overnight, and in the investors' minds — any of these new projects might be the next Bitcoin.
Of course, no such coin has appeared as of yet, and the investors were left with worthless coins and with no money. This is why the bear market helped — with falling prices, investors got more picky when it comes to projects they would support. As a result, no one would invest in fake projects, because no one was investing in anything anymore. This eventually drove most of these bad players away, leaving the market in a better condition than it was.
Giving Valuable Projects A Chance
Another positive consequence of the bear market is that it eliminated weak projects that had no real chance of succeeding. These were real projects, but they were considered to be weak for a number of reasons. Either the project had no real goal in sight, or it was rushed so that the company would be able to sell their coins as quickly as possible, or even if the reason is something else entirely — without the bears to damage the space, these projects would have stuck around for much longer.
Even with no future ahead of them, they would still be able to convince willing investors to give them their money. In the end, the projects would have likely died anyway. However, a lot more investors would be affected, and they would never get anything in return.
With them out of the way, real, strong, innovative projects managed to take the spotlight, and those willing to invest would focus their funds properly, giving them to the right firms. These are companies that can bring new and improved products, whether they are more secure wallets, a new coin, a Lightning Network, or even an entire exchange with better options. The crypto winter brought the spring of crypto innovation, which is why it is seen as a good thing, despite the damage it caused.
Giving Regulators Time To Catch Up
The lack of crypto regulations has been one of the biggest problems of the crypto industry around the world, and it has yet to be dealt with. Regulators took notice of cryptocurrencies relatively recently, or at least, they started paying attention recently. Before 2017, they likely never considered cryptocurrencies to be more than a passing trend. However, the crypto boom made them realize that digital currencies are here to stay.
However, due to their decentralized nature, it was difficult for regulators to come up with a proper regulatory framework which would protect investors, and still allow cryptos and crypto businesses enough room to grow.
The initial waves of regulations were not helping the crypto space, and instead, they only brought fear and uncertainty. Many speculated that the situation might lead to the total ban of cryptos, which is why investors were hesitant to buy digital coins. However, once the crypto winter struck, and the prices went down, investors slowed down as well, which gave regulators much needed time to study the space and try to come up with working regulations. They have yet to create any proper framework, but they are much closer to achieving this now than they were a year and a half ago.
Get Ready For A New Bull Run
Throughout 2018, everyone was waiting for the crypto winter to end, and many predicted that it might happen before the year ended. It did not happen, not by the end of the year, but the bears seemingly started losing their influence. This caused many to believe that bullish prediction might still come to pass, and 2019 suddenly became a year of great expectations.
So far, we have only been three months in, and already there is a noticeable shift in the way the market ‘breathes.' February was marked by a series of smaller bull runs, and March has seen similar behavior from cryptocurrencies as well.
While predictions that BTC will hit $20,000 are likely way over the top, even for the most bullish outcome, a new massive bull run will undoubtedly arrive sooner or later. Many analysts have claimed so as well, as they supposedly managed to notice a pattern in Bitcoin's behavior, and even now, BTC still leads and commands the market.
Further, many are expecting institutional investors to finally start joining in, and some early adopters have already made minor investments. As the regulations start emerging, and investors start arriving in greater numbers, the crypto market is likely to see a larger cash flow than ever before. This will be when the bull run will finally start, and when coins will once again surge too much larger heights.
Those who believe in this version of the crypto future have already started preparing themselves by investing in their favorite coins, and they are holding them in a safe place, waiting for the moment when the prices will go up once again, and encouraging others to do the same.