The capitalization of the general crypto market dropped from $3 trillion to $1 trillion, the bitcoin price moved down by almost 70%, and some well-known companies in the crypto space faced bankruptcies or cut their workforce. That’s all a representation of the bear market.
For crypto newcomers, the bear market may become a sudden cold shower with a potential change of heart towards the crypto industry. Experienced crypto enthusiasts typically see the bear market as another season of doomposting and crypto market obituaries but they still can be concerned about how different projects will overcome this period.
Undergoing events in the global economy may fuel uncertainty, incentivizing a bearish narrative in the crypto market. However, many of our users see that we stay calm. In this article, we want to clarify such a vision of the bear market.
The bear market as a tradition
Bear markets in crypto are more frequent and more spectacular than on a wider stock market. The reason for this is the rapid growth of the crypto industry. From March 2020 to November 2021, the crypto market cap experienced a 20x increase. For comparison, it would take 35 years for S&P 500 to show the same results.
The road from $150 billion to almost $3 trillion for crypto (upper image), and from 240 to almost 4,800 for S&P 500 (lower image)
Because of such huge rallies, the crypto market may also experience no less big and rapid falls. As history shows, these major ups and downs in crypto happen approximately every four years. As a result, crypto market behavior cultivated the theory of native cycles, and made the bear market some kind of periodic dry season in crypto.
Previous crypto market cycles show that the bull run typically lasts for 1-1,5 years. This is followed by an approximately 1-2 year bear market, and a 1-2 year accumulation period (when prices predominantly move in a certain range). Noteworthy, that the average duration of bear markets in the stock market is the same. Starting from 1945, there have been 12 bear markets (defined as a stock market decline of 20% or more) with a 1-2 years average duration.
Of course, previous market performance doesn’t guarantee future outcomes. It doesn’t define the potential duration of the current bear market either. Crypto market cycles may break or last for longer/shorter periods than usual. Furthermore, each cycle has its own reasons for rally and triggers for the bear market that may be difficult to predict.
The main point is that cyclical market behavior may navigate participants through potential market expectations and help them prepare in advance.
The bitcoin price as an example that things can move out of the curve and when preparation can matter.
What does it mean for us?
A bull market can be considered a perfect time to prepare for a further bear market. CEX.IO was founded in 2013 when the crypto market cap was a mere $1 billion. The following year after the CEX.IO foundation the crypto space entered bearish market conditions. We learned a lot of lessons, and gained significant experience from this period. During the bull run in 2017, we followed our rules to prepare for the next perfect storm, and meet the next rally being stronger than before.
As a result, we met this bear market with over 5 million users worldwide, and an experience of overcoming major bearish periods in crypto along with numerous local market declines. We know our financial limits and have a plan for the next period. At the same time, our established users know that one of our goals is to be flexible while maintaining stability.
The bear market is when utility comes first
A bear market is a time when the market determines projects that talk and projects that actually work. Because of that, the bear market is also accompanied by the cleansing of the industry from projects who rather wanted to take a ride of the bull run than were rational during the market rally. Doing such a cleansing means that there is room for new projects that take into account the experience of predecessors, and for established projects that can adapt to market conditions. It means that the crypto industry becomes increasingly mature with consecutive bear markets.
Bear market reminds us that utility may become a key factor for further adoption of services. In order to be more competitive in the next bull, it’s important to be more proactive during the bear market, adding new features, and expanding the opportunities for users in the ecosystem. Therefore, if the bull market is a preparation for the storm, then the bear market can be considered a preparation for future success.
What does it mean for us?
CEX.IO dedicated years of work to making crypto simple and accessible to all. Therefore, we put utility at the forefront regardless of existing market conditions. Whether it’s a bull run or bear market, our team works to offer a basecamp for comprehensive and secure exploration of crypto services. By embracing global and local regulations, we achieved the support of over 99% of countries to make this exploration possible for almost everyone
Our current CEX.IO ecosystem is a result of the hard work of our team that is focused on offering a full range of purpose-built products and opening the gate for opportunities in the crypto space. During this bear market, we will continue to work on expanding and improving the ecosystem, meaning adding new features, and enhancing the utility of existing services.
Bear markets are not eternal, but it’s important to prepare for them not only financially but also psychologically. Looking at bear markets only as “difficult times” where one needs to comprehend numerous challenges can be mentally exhausting. However, we strive to perceive bear markets as a consolidation period to achieve our long-term mission, and another phase that can make the entire market more mature.
A 2014-2015 bear market brought the dawn of altcoins, while a 2018-2019 bear market planted the seed of the DeFi sector. We are not only looking forward to seeing the next step in the crypto market evolution, but also aiming to take part in the adoption of new opportunities and navigate users through new horizons.