Crypto market cycles happen every 4 years and are instigated by the bitcoin halvings in 2013, 2017, and 2021 respectively. Every cycle, we see all-time high prices during bull runs, followed by significant price pullbacks during bear markets. In fact, on at least 6 occasions last year, digital asset prices fell more than 20%. Bitcoin’s price dropped 50% over a 3 month period, which was the 4th time in 4 years that bitcoin had fallen by 50% or more. Traditional finance is starting to understand Bitcoin volatility as well. Morgan Stanley, in their “State of the Bear Market” research report, said that the recent 50% drawdown in Bitcoin price from November highs is “nothing new” and is within “historical norms.”
This is a key point to understand; Bitcoin and crypto are emerging global technology, with less than 4% global market penetration, with assets that are allowed to be traded openly 24/7. These three factors combined together will undoubtedly result in short-term market volatility, but if we zoom out and look at annual performance, the trend is clearly upwards.
If you have been in the crypto space for more than one cycle, then these “bear market” times represent a great opportunity. Here are three reasons why:
Crypto discount, or as we call it, “buying the dip”: The psychology of investing is fascinating. When prices are at all-time highs, everyone wants to join the party. Then when prices fall, people get scared. If you believe in the future of crypto, then it’s clear that we are still in the early stages. Bear markets are when you add to your stack.
Lessons learned: Many people join crypto in the middle of a bull run, and the gains can be very exciting for sure. However, some get greedy and take exaggerated risks or invest more than they should have. A market correction will check people’s greed and can serve as a valuable learning experience. Zoom out, study the long-term trend, and develop a deeper understanding of the fundamentals of crypto. If HODLing was easy, everyone would do it.
Market maturity: What doesn’t kill us makes us stronger, and at this point in crypto’s lifespan, there’s no way to kill it. Crypto already won; it’s just a matter of waiting for the rest of the world to realize it. Although, of course, crypto “going to zero” is a non-zero possibility, it is extremely unlikely.
No one likes a bear market, but for us working, building, and investing in crypto, the bear market is where a lot of value is created. Bear markets are when we sow the seeds. Bull markets are when we reap the rewards of our conviction in crypto.