Bitcoin Is Now in a Bear Market

Bitcoin Is Now in a Bear Market

Knowledgebase
17/02/2021 by Koinal
47
Bitcoin has come to the forefront of its rising performance and as an asset that has not been affected by the worsening economic conditions throughout 2020
Bitcoin Is Now in a Bear Market

While unprecedented volatility and uncertainty hit the stock market, Bitcoin seemed like a safe investment not only by cryptocurrency enthusiasts but a large number of investors and companies. However, speculations claiming that Bitcoin -the world’s most popular digital currency- is falling into the bear market have been circulating recently. A bear market is described as a period when an asset declines at least 20% in prices parallel with the fall of values in the stock market. This situation mostly occurs following an overall economic downturn.

Like the Dow Jones Industrial Average (the DIJA) and the Standard & Poor’s 500 (the S&P 500), the main stock market indexes are two significant indicators to notice the bear market. The value of stocks and other assets can decrease by falling markets. Falling markets also limit the number of buyers at favorable prices, and it can be difficult for sellers to sell. When investors are pessimistic and afraid, the insecurity of the marketplace increases. Investors seek a stable environment in which the market grows, and investors can predict prices. On the contrary, unexpected declines confuse and affect investors negatively.    

When stock markets lose value and other assets fall in price, a bear market is likely to emerge. The decline in prices can lead investors into pessimism which reduces the trading volume in the stock exchange market. It is not always easy to predict how long the bear market will last since the situation is related to pessimism and a declining trend in prices. While demand falls in Bitcoin and other cryptocurrencies, prices also display a declining graphic throughout the bear market period.

The investors’ psychology, the recognition and reliability of Bitcoin and other cryptocurrencies, and their adoption and integration into the mainstream also affect the main trend’s direction. Bitcoin, concerning the issues mentioned above, has a promising future. Moreover, Bitcoin can benefit from the available advantages: prices approaching the peak of all time; increasing liquidity with financial incentives called printing money by governments and central banks; rapidly rising market value that makes Bitcoin as a potential target for institutional investors; Bitcoin investors’ increasing trend in considering it as a store of value against inflation; acceptance of Bitcoin as a digital gold in nearly 12 years.

Also, Bitcoin investors indicate there is a limited number of tokens that hedges Bitcoin against the ballooning. Indeed, the overall number of Bitcoin which can be mined is 21 million. 18.6 million tokens are already in circulation and the mining of the rest of 2.4 million tokens will take approximately 120 years.

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