Giddy is not a fiduciary and does not provide financial advice. The Giddy mobile app is a self-custody crypto wallet that provides access to buy, hold, send, receive, and stake crypto into decentralized finance protocols. Always consult with a certified financial professional before making financial decisions.

A crypto bear market is a continuous period where many cryptocurrency assets decrease in value. A bull market is a period where assets increase in value. Both bear and bull markets offer their share of pros and cons for investors, and both market types can be precipitated by, and sustained by a multitude of factors.

To better understand what makes a crypto bear market, we need to understand markets and cycles. Let’s dive in.

A Brief Primer on Market Cycles

The term “market” describes the supply and demand of a good or service. Markets go up and down as demand increases and decreases relative to supply. When more people are wanting to buy than sell, the price increases. When many people want to sell and only a few people want to buy, the price falls.

Investors may put money into commodities, stocks, cryptocurrencies, or other assets for many reasons. In some cases, they simply believe in the value, purpose, mission, or vision of a specific asset and want to support it. In other cases, they believe they will make a better return than they would get with other financial assets, such as Savings accounts, real estate, bonds, CDs, or gold.

Crypto markets follow similar principles as other goods and services—investors seeking to maximize returns may attempt to buy crypto when prices are low and then sell for a profit once they believe the price has reached a peak.

Cycles are patterns found nearly everywhere in trading. Smart investors seek to use and understand these cycles to know when to trade.

Let’s look at the four phases of a market cycle:

1. Accumulation Phase

2. Markup Phase

3. Distribution Phase

4. Decline/Markdown Phase

1. Accumulation Phase

The accumulation phase begins after the market has bottomed out. At this point, individuals and organizations begin to buy with an expectation that prices will soon start to rise again. The market is still a bear market, but while inexperienced investors sell their assets, early adopters pick them up at a discount. 

2. Markup Phase

During this phase, a market stabilizes and prices begin to rise. The media begins to speculate that the worst is over, and many investors are more afraid of being left out of the market. The early majority has already bought in, and now, late investors are jumping on the bandwagon. The market becomes bullish.

Near the end of the markup phase, volumes increase substantially. Investors sometimes ignore reason and logic, and trust the market will reach historic highs. As smart money investors unload their shares, the late majority of investors are just getting in.

3. Distribution Phase

As the market transitions into the distribution phase, more people start to sell. Prices may remain locked in a trading range for months as investors go through periods of fear and hope. Value investors have long since left the market as the overall sentiment slowly but surely transitions. Those unable to make a profit will often settle for a breakeven price or even a loss. 

4. Decline/Markdown Phase

The final phase is the most damaging to anyone still holding onto the market. Many refuse to part with their investment because it is worth far less than what they paid and they don’t want to take a loss. Once the market has plunged to staggaring lows, some laggards may finally give up. This is referred to as ‘capitulation’, and may be a signal to early innovators that the market may be at a bottom. The cycle continues. 

What Should I Do in a Crypto Bear Market?

How can you tell what type of market you will experience? As Morgan Housel, author of The Psychology of Money, puts it, “If you’re a long-term investor, the odds of experiencing a crushing bear market and a recession are 100%, yet so many act surprised and shocked when it happens.”

In other words, if you are a long-term investor holding money in volatile assets like stocks and crypto, there is almost no way to avoid a bear market. No risk, no reward—right? 

There is a learning curve for new investors who want to make significant money from cryptocurrency. We’ll share a few good practices that can help you minimize risk and mistakes. 

Consult With a Certified Financial Professional

While reading articles on the Internet can be a good way to gather your bearings (hello there!), everyone’s financial position is different. It’s dangerous to take advice from someone who isn’t certified with an understanding of financial planning AND who is familiar with your specific situation and goals. Start your journey by speaking with a certified financial professional that you trust.

Invest Only What You Can Afford to Lose

Are investments important? Of course, but so is eating and paying for housing. Generally, you should avoid pulling budget funds from short-term needs like groceries, a mortgage, or utilities to invest into volatile assets like crypto. 

Bear markets can be destructive in the short term, so don’t invest funds you can’t afford to lose.

Detach Your Emotions

Fear, Uncertainty, and Doubt (FUD) is a marketing strategy that involves using misinformation or skewed data to create fear and manipulate buyers. Investors should always separate their emotions from the decision-making process.

What feels like a catastrophe now may be nothing more than a small blip down the road. Emotion can cloud rationality in a stressful situation. Take your feelings out of the equation and do your best to make decisions based on logic and sound reasoning.

Consider Dollar-Cost Averaging

Dollar-Cost Averaging (DCA) is a strategy where an investor purchases a set amount of an asset over regular intervals regardless of the market price. This is meant to reduce the impact of market volatility when buying into a position.

Over the long run, your cost will average relative to the performance of the asset, leaving you with a better overall entry price for your investments compared to purchasing in a lump sum during a bear market.

Own Your Crypto with Giddy

Giddy is the self-custody recoverable crypto wallet where you can buy, send, receive, and earn cryptocurrency all in one easy-to-use mobile app.

With Giddy, you always own your keys which means you always own your crypto. And, you can put it to work for you on the blockchain by staking into decentralized finance protocols with a single swipe.

Own and grow your crypto with Giddy!