The cryptocurrency market is one of the most volatile sectors in the financial world. Currently, we witness that it’s in the bear cycle. This bearish rally started at the end of the previous year when Bitcoin and big altcoins started falling below their historical price maximums.
Obviously, crypto enthusiasts are curious about how long this bearish rally will last and when their crypto investments will start bringing profits again. In this article, we’ll try to give an answer to this question by defining the meaning of the crypto bear market and observing the performances of the previous bear markets. Let’s get down to business!
Declining Market Tendencies Explained
To understand when the crypto bear market will end, we need to provide its basic definition and find the difference between this term and other declining tendencies. Basically, a bear market refers to a trend when the majority of cryptocurrencies or stocks lose around 20% of their value. As a rule, the declining movement continues for not less than two months. If it’s a short-term decline, we cannot call it a bear market.
Bear cycles are common for both stock and crypto markets. Usually, the interval between bear cycles in the crypto market lasts about 2 years. The stock market isn’t as volatile, so the duration between bear cycles might be as long as 4 years.
The crypto bear market isn’t much different from the stock bear market. You will see red charts of coins price and a lot of criticism in the media. The dropdowns in the crypto market are quite significant, even for the biggest assets such as Bitcoin and Ether.
Bear cycles in the crypto market cause more financial losses than bearish tendencies in stocks. The volatility and highly-speculative nature of cryptocurrencies are the major reasons. The more speculative investors are involved in the market, the harder assets will move down. The crypto market is full of speculative assets since crypto speculations might not require such big volumes of funds as in the stock market.
While defining the term bear market, we shouldn’t confuse it with other declining tendencies such as recession and depression. Although cryptocurrencies are considered good stores of value during such economic events, they might also be impacted. A recession, for example, causes an economic downturn lasting two consecutive quarters. Recessions aren’t as frequent as bear cycles. On average, we face them once in ten years.
Depression is a more serious problem for the economy. Depression can be defined as a big recession lasting at least 3 years. It has a big impact on the global economies and can affect even such decentralized markets as the crypto industry. During such severe economic downturns, investors simply might not be interested in such low-liquidity assets as cryptocurrencies.
The Analysis of Previous Crypto Bear Markets
When you analyze the market, it’s necessary to consider previous tendencies. Historical data can tell you how the crypto market might behave in certain conditions. That’s why we’ve decided to take a look at the previous bear cycles in the crypto market. For how long did they last and what were the consequences?
- 2011–2012. This bear cycle lasted for 185 days. When it ended, the bullish reversal didn’t happen immediately. It was volatile for several months – both short-term spikes and turn-downs took place. This bear cycle caused the major cryptocurrencies to lose 40% in their prices.
- 2013-2015. This cycle was longer than the previous one. It lasted for 415 days. The reduction was also much more severe. The average decline reached 83%.
- 2017–2018. The bear cycle lasted for a year – 365 days. Although this wasn’t the longest bear cycle in crypto, it caused the biggest reduction, amounting to around 84%.
- 2019–2020. Compared to the previous two bear cycles, this one wasn’t as significant. It lasted for around 260 days and led to a 62% reduction.
From these historical data, we can see that the average downturn in the crypto market during the bear rally is around 61%. The average duration is around 306 days. That’s why we can expect the currency bear cycle to come to an end somewhere in 2023.
Final Verdict
As we can estimate, this bear market will not end tomorrow or in a month. Historical data says that it might last for several more months, ending up in 2023. However, what we can say for sure is that now we aren’t in the middle of the bear cycle, meaning the biggest losses have already happened. Today, you can start considering a cryptocurrency to invest in.
