Is this a Bear Market?
Let's look at the three characteristics...
This hasn’t been a great month (or two) for crypto. If you’re invested, you know it.
“Up-vember” and “Moon-cember” haven’t played out the way analysts expected. We didn’t end November on a high, and now we’re halfway though a December that also looks to be stagnant.
Funny how $46,000 Bitcoin feels like a down.
Take a time machine, go back five years, and tell the Bitcoin maxis that is the 2021 price for the asset. They’d faint from the shock, then sell everything they had in order to buy more. In December 2016, Bitcoin cost about $785 a coin.
That’s how far it all has come.
Five years ago, what were you doing? I know what I was—sitting at my secondhand kitchen table staring at my husband wondering what was going to happen next because Donald Trump had won the presidency in a shock election. I was simply trying to get through each day as speculation swirled that the US had entered an unknown vortex that would end in certain Armageddon.
Dramatic much?
For once, I didn’t have myself to blame for that. The headlines screamed it for me. And in that environment, Bitcoin was about as far from my mind as Pluto.
My next glass of red wine, however, was very much at the forefront.
Still, as I drank away my fears, there were people on board the Bitcoin movement. They saw what I could not. Worked for them. They have very different lives today. From a financial standpoint, Bitcoin has been very good for the long-term HODLers. They are a small group, and an incredibly shrewd one.
So what about right now—in December 2021? Where the heck is this thing headed if it’s lagging when most people think it should be soaring? Experts are trying to pin that down, but let’s be honest about their analysis of what will happen next.
They have no idea.
To be clear, I’m only writing about Bitcoin’s price in this post because Bitcoin is the crypto bellwether. It has 40% of the market. What happens with Bitcoin is what happens with crypto. Someday, that might different. Not today.
Now, there are some metrics that we can use to answer the question of whether or not we have entered into a bear market. Here’s a basic thumbnail of bear market characteristics, according John Hancock Investments:
A decline of over 20% in prices within two months of the last all-time high
Investors feel panicked, pessimistic, and fearful
General economic outlook is poor
Hate to break it, but the answer is ‘yes’ to all three of these questions.
Yikes.
Bitcoin hit the all-time high of $68,789.63 back on November 10th, and has given back over 20% since. Investors are panicked, and the sentiment index points to fear every day. In addition, our general economic outlook is poor as people navigate the Omicron variant of COVID-19, pending shutdowns (some confirmed), a labor squeeze, a supply chain crises, and record inflation for every economic behemoth. All that froth affects Bitcoin and the other cryptocurrencies.
Bear market it is, then. Cheers to the losses! Hey man, I don’t make the rules here. It’s just what it is. You don’t have bulls without bears.
So am I upset? Nope. I’m encouraged, and even a little hopeful. Why? Because a few things happen in bear markets that I like.
Less people invest, making more available
Prices are in decline
I don’t have to rush, and can make a methodical move
Sobriety lets you see the whole battlefield, like a lifting fog at dawn
I learned these things about myself back in 2008. I wasn’t making a ton of money, but I had a good job and a 401K I cared about. I was lucky enough to stay employed even after the Great Recession upended the economy. At one point, the turmoil caused a round of workplace layoffs that left me sobbing in the parking lot. After the cuts, I went to the HR department and asked to increase my 401K contribution another two percent. I remember the look on her face as if it happened yesterday. Might have had something to do with the fact that stocks also had a few thousand point drops around that time, which was quite significant since the Dow Jones Industrial Average was about 1/4 what it is now.
“You’re the only one who is doing this,” the woman told me. “Are you absolutely sure?”
“I don’t need the money right now,” I insisted. “So let’s do it.”
You can guess how this worked out. When I left that company a few years later, I took a sizeable 401K with me as a parting bonus. The increase in automatic investment created gangbuster growth once the market rebounded. I had more shares, and that equaled more money.
I’m doing the same thing now, with but this time with Bitcoin.
Lots of people are running away from the orange king, but I am running toward it. Now is the time for me to snatch what I can before the price rises again. Recently, I moved the last chunk of Bitcoin I had on the exchange into a hard wallet. Doing this will make it much trickier for me to panic sell. I missed this thing for ten years. Never again.
Sobriety, remember? Hangovers hurt, but they have to happen.
When will the bear market end? Nobody knows. A week, a month, three months…
The HODLers talk a lot about the 2018 market, which was a confirmed bear. It lasted a year. Be prepared for it all to get quite ugly before it heads to a new high.
What do you think? Do you agree this is a bear market? Are you buying? Or have you sold?
The Crypto Connection is for entertainment purposes only and is not meant to be financial advice. Please do your own research before investing in any asset class. Sara Celi is not a financial advisor, and holds several cryptocurrencies. To purchase her books on Amazon, please click here.