Will The Crypto Bear Market Ever End?

You must’ve heard the term bear market being thrown around whenever the crypto market consistently falls for a prolonged period of time. Truth is, there’s no textbook definition of a bear market. 

But an average drop of 20% in the value of cryptos from their most recent highs is enough to enter a bear market according to experts.  By this logic, the crypto market has been bearish since December 2021. 

That said, this isn’t the first time the crypto market has entered “bear market territory”, nor will it be the last if history is anything to go by. Join us as we examine whether the crypto bear market might end soon. 

Current Scenario Of The Crypto Market

Since December 1st 2021, the value of BTC has fallen by $18,000, ETH by $1,900, Binance Coin by $240, and the list goes on. There’s no easy way of putting this - the crypto market is having a tough time. 

Markets don’t suddenly become bearish, however, as there are multiple reasons involved in the continual decline in prices. This time around, experts believe that these are the factors for the crypto bear market:

• Interest rate hike: The US government is planning to raise the interest rate sooner rather than later as they believe that the economy doesn’t need hand-holding anymore.   
• Falling tech stocks: The crypto market has some degree of correlation with the US equities market and is known to move in tandem with the tech-heavy NASDAQ index, which has been going through a correction over the past few months
• Rampant inflation: The US is struggling with record-high inflation along with countries like Brazil, Turkey, New Zealand, and others
• Bans and regulations: Russia is vying to ban daily crypto trading completely while countries like India are mulling over a tough crypto bill
  

There may be several other factors along with these that are causing cryptocurrencies to fall. But broadly speaking, these factors can be used to arrive at this summary:

• Rising interest rates could mean that institutional investors have relatively less money to splurge on speculative assets
• Investors are known to turn to more stable and less speculative investment options when the markets are bearish
• Middle-class citizens from across the globe tend to prioritize needs first before speculative investments during high inflationary periods
• Confidence in crypto is known to go down with each new ban or regulatory hurdle
  

Like we briefly mentioned before, this isn’t the first crypto bear market the world has seen. The crypto winter, as it is popularly known, of 2013-2015 and 2018 was torrid but cryptocurrencies like BTC recovered.

Will that happen this time around as well? We’ll have to turn to the facts that we know in order to understand what lies ahead, especially during these uncertain and pandemic ridden times.  

Steadily Growing Crypto Market

2021 was a big year for crypto in many ways. Big brands started accepting BTC, ETH, DOGE, and others as payment while crypto investments from countries like India soared to record highs. 

The market cap of cryptocurrencies reached $3 trillion at one point in 2021, powered by the likes of Venture Capital funds that invested as much as $30 billion. 

Remember, these investments happened even with lockdowns, new variants, China outlawing crypto, and other events. Long story short, there’s a lot of money invested in crypto. 

The trend looks to continue in 2022. A shining example would be the fact that crypto and blockchain startups have raised as much money in January 2022 as all African startups did last year. 

Mind you, the African startup market isn’t a pushover and is growing at the rate of knots. The reason for this could be that the crypto market is currently forward-looking, as explained in the next headings. 

The Impact Of NFTs On The Crypto Market

Non-Fungible Tokens (NFTs) have blown into popularity over the past two years. Artworks and collectables are known to be the most popular types of NFTs because they sell like hotcakes. 

The thing is, NFTs are treated purely as assets and have evolved separate qualities and benchmarks compared to cryptocurrencies. Think of the Bored Ape collection versus Bitcoin. 

But the savviest of NFT investors and top-notch research can tell you that the crypto and NFT markets are somewhat interrelated, not in terms of volatility but investor behaviour and uncertainty. 

After all, NFTs are built on the blockchain and priced in cryptocurrency so a decline in crypto markets will be bad news for NFTs as investors may or may not be confident enough to pay the steep prices. 

That said, the long term outlook towards NFTs is largely positive according to many experts and we’ll have to wait to see how this plays out with the bearish crypto markets.  

The Rise And Rise Of The Metaverse

The metaverse is going to become a reality sooner rather than later as companies like Facebook have rebranded themselves to Meta as a way of signalling their seriousness. 

Cryptocurrencies will have a major role to play in the metaverse. One, they offer a quick and decentralized way to facilitate transactions and two, they’re completely digital. 

Platforms like Decentraland and Axie Infinity have already laid somewhat of a blueprint for integrating cryptocurrencies with the metaverse, which can be viewed as a positive long term sign. 

Conclusion

Volatility and bear runs are as old as the market itself, regardless of whether it’s in relation to commodities, stocks, or cryptocurrencies, and are driven by a variety of factors. 

We’ve discussed some of these factors for the recent crypto bear market and the silver linings that exist in the form of the money being poured into cryptocurrencies, NFTs, and the metaverse. 

Whether or not this bear run will end anytime soon remains to be seen. But what is certain is that the coming weeks and months will define the fragility or lack thereof of cryptocurrencies. 

Note: Facts & figures are true as of 02-02-2022. None of the information shared here is to be construed as investment advice. Exercise caution when investing in unregulated assets like cryptocurrency.‍