Everywhere you look in crypto, it is raining red!
For the first time, the global crypto market cap fell below a trillion dollars with the collapse of almost all cryptocurrencies.
Within 7 months, BTC alone had dropped by more than 60% after plunging to $17K. Experts even predict it could potentially drop to $14k.
Investors are getting flustered right now; what caused the crash, and when do we expect another bull run?
I will answer all these questions in today’s post. So, make sure you read to the end!
Post Summary
This is what I will cover:
- What Caused This Recent Crypto Bear Market?
- When Will The Crypto Bear Market End?
- How To Stay Profitable In A Bear Market
- Conclusion
Brace yourself, and let’s dive in!
1. What Caused This Recent Crypto Bear Market?
We can identify 4 factors:
(a) Feds
Now, I know what you’re thinking: what is Feds?🤷♀️
Feds, short for Federal Reserve System, is the United States’ central bank.
The Feds can implement several policies to ensure the financial stability of the US.
One of those policies relates to the interest rate charged by banks.
Now, unless you’ve been hiding under a rock, you must be aware of how the COVID-19 lockdown beleaguered the global economy.
For the Feds to muddle through this event and ensure that the economy continues to thrive, it took two actions:
- Printed more money: It printed over $3 trillion, of which up to $600 was airdropped to people monthly, while the rest went to the purchase of securities and bonds to bolster liquidity.
- Lowered interest rate: It reduced bank interest rates from 1%-1.25% down to 0%-0.25%.
This new development pumped money into the system, and people easily borrowed money to spend.
Also, investors became anxious about hedging their funds into higher-yielding and higher-risk assets like cryptocurrencies, thus skyrocketing their price value.
The caveat, however, is that the money that flooded into the economy led to inflation.
To put inflation at bay, the Fed hinted in late 2021 that it would increase interest rates.
Higher interest rates result in less borrowing, higher interest rates in bank savings accounts, and less cash flow to spend or invest.
In response, many investors started pulling their funds from higher-risk assets like crypto, thus tanking their prices.
(b) War
When Russia attacked Ukraine on February 24, 2022, the global crypto market cap fell by $200 billion, a 12% drop in just 24 hours.
Specifically, BTC fell by 9%, ETH by 12%, SOL by 10%, and so did other cryptos.
This likely happened because Russia and Ukraine are among the top countries to adopt crypto and crypto mining operations.
And as expected, weak-handed crypto investors also sold off their holdings out of FUD.
Again, Russia and Ukraine account for 29% and 62% of global wheat and sunflower oil supplies, respectively.
Other major products include oil and gas, fertiliser, corn, and barley.
For example, Egypt, Ethiopia, Pakistan, Namibia, and so many other countries depend on Russia and Ukraine for wheat.
However, due to their ongoing conflict, Russia and Ukraine cannot export these goods to these countries.
This means that the cost of these products will soar and investors have to liquidate their assets, including crypto to afford them.
Eventually, the sell-offs will result in a downtrend or a bear season.
(c) The Terra Network
The Terra network experienced the world’s largest crypto crash in history.
And it happened on May 7, 2022, after Terra’s stablecoin, UST, lost its peg to $1.
LUNA, the network native token plunged 99.99% and the network’s entire market cap plummeted by over $50 billion.
The event also saw a large sell-off of UST, LUNA, and the BTC used to back the UST.
Precisely, 50,000 BTC, worth over $3 billion, were sold in a bid to salvage the Terra network. However, all was in vain.
On the gloomy side, this massive sell-off of BTC led to a downward spiral trend in the entire crypto market.
Unfortunately, some of the major crypto companies, including 3AC, Voyager, Babel Finance, etc., were impacted by Terra’s collapse. You will learn more below.
(d) The Collapse Of Crypto Lending Platforms
The collapse of most crypto lending platforms contributed to the downward trend of the crypto market.
It all started with Celsius, a platform with millions of users and up to $25 billion in assets under management.
Celsius allows users to lend, borrow, buy, and swap their crypto.
However, it froze withdrawals on June 13, 2022, after experiencing a run on the fund and sudden bankruptcy.
It wasn’t just Celsius that had this experience; other crypto lending platforms, including Voyager, Babel Finance, etc, are on the line.
Furthermore, the cryptocurrencies associated with these platforms witnessed a heavy decline in price.
I uncovered all you need to know about this collapse in this post.
(e) The Ripple Effect
As you already know, altcoins are heavily co-related to BTC.
Therefore, a decline in the price of BTC eventually impacts the entire cryptocurrency market.
For example, if BTC falls by 20% because of the Terra LUNA crash, it means that altcoins will have their values slashed as well.
Sadly, some altcoins are likely to fall by over 40% as a result.
Additionally, assume that the price of an asset starts to fall.
There is a strong tendency among investors, including micro, retail, and weak-handed investors, to immediately start selling off a huge chunk of their assets.
An example is the sell-off of stETH after its depeg.
This sell-off will eventually drag down the price of the crypto market.
But, of course, most investors are not selling off to abandon a project.
Instead, they have the intention to buy the bottom for a massive profit.
Continue to the next section!
2. When Will The Crypto Bear Market End?
Although it is unclear, let’s examine the crypto market cycles to get a verdict.
See it as the previous trend of the crypto market.
There have been three major crypto market cycles in the bull and bear seasons. See the table below!
Assume BTC and ETH were to go as low as their previous cycles’ ATL of -83% and 94%, respectively.
It means that the prices of BTC and ETH will go as low as $11,400 and $280 before we expect another bull run.
Hey! this is just my speculation.🙋🏻♀️
On the bright side, some experts are speculating that the crypto market has crashed to its bottom.
If this assertion is accurate, then we should expect to see an upward trend in the prices of crypto assets soon enough.
Head over to the next section!
3. How To Stay Profitable In A Bear Market
I will share with you my top 5 strategies:
– Generate Passive income
Use your coins to earn some additional coins instead of letting them sit in your wallet and lose value.
The idea is that when the market recovers, you’ll have more coins to profit from. Pretty cool, right?
There are many ways you can do that, and they include staking, yield farming, lending, liquidity mining, etc.
An example is a cryptocurrency ETF 2.0 project like Tenset.
It allows you to earn over 20 coins as airdrops by locking the 10SET token in the Tenset Infinity Airdrop.
– Invest in launchpads
Launchpads are platforms where newly launched tokens are sold at a discounted price to early investors before they are listed on exchanges for trading.
A launchpad investor is more likely to earn more profit from a token than a public sale investor.
However, there is a need to conduct explicit research before investing in any launchpad token.
– DCA
DCA stands for – Dollar-cost Averaging.
It is an investment strategy in which an investor buys an asset, say BTC, with a fixed amount of money at regular intervals, regardless of the coin’s price.
With this strategy, you can buy the dip at the lowest price possible and make good returns when the market eventually recovers.
– Find a crypto job
Services like community manager, writer, video editor, programmer, marketer, etc. are in high demand in the cryptocurrency industry.
The good thing is that many crypto companies are still hiring staff to work even remotely.
Where do you find these job opportunities? You can use Google search or Linkedin.
– Trade like a pro
One of the best ways to make the most out of this bear season is to trade strategically like a pro.
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4. Conclusion
You have reached the end of this post. I hope you must have made a full note.
Now it’s time to get your thoughts.
What do you think about this bear season?
Do you think we have reached the bottom?
When do you think the market is likely to recover?
Please leave your comments in the box provided.
Remember to share the post. Cheers!
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