Crypto markets are undeniably bearish, but some industry insiders believe these conditions will shake off bad players and create greater opportunities for future entrants.
Traders tend to lament negative price action and the relative difficulty of executing profitable trades in bearish market conditions. However, several leading analysts and builders agree that this is the time to make moves that will lead to the biggest gains when bullish sentiment returns.
Polygon co-founder Mihailo Bjelic told CNBC on Friday that the current recession and the recent sell-off earlier this month were just what the market needed.
Bjelic believes the market became “maybe a little bit irrational, or maybe a little bit reckless” as the total crypto market capitalization grew 12.5 times between November 2019 and November 2021, a tremendous growth rate that surpassed to most other traditional markets:
“When times like this come, [a] correction is usually needed, and at the end of the day [is] healthy.”
The market is in the midst of a major correction at the moment. Since last November, the total market capitalization has shrunk by 60%, from $3 trillion to $1.2 trillion, according to CoinGecko. Cointelegraph reported on Saturday that traders are still expecting more pain, especially considering the last bear market slashed prices by 80% overall.
Crypto market analyst The DeFi Edge added context to the idea that bear markets bring profits that remain in line with the interests of most market players. The account tweeted to its 164,000 followers on Sunday that “bear markets are healthy for crypto growth.”
This line of reasoning is based on the observation that fewer new market entrants, which fraudsters see as potential targets, enter during a downtrend. Over the past year, Bitcoin (BTC) transaction volume peaked on November 9 at 335,411, coinciding with the price peak. On Sunday, transaction volume dropped by 38% to just 207,859, according to Blockchain.com.
Less activity means less opportunity and reduced profitability to run many scams so they tend to go away.
Bear markets are healthy for Crypto growth.
Dead weight is removed and Crypto can soar to new highs. pic.twitter.com/5wKEzHxy6B
— The DeFi Edge ️ (@thedefiedge) May 28, 2022
Jason Ye, a partner at crypto investment fund ROK Capital, explained that although prices and activity are lower, bear markets represent prime-time moments for traders and builders to lay the groundwork for greater success when market sentiments they reverse. He told Cointelegraph on Monday that “In a bear market, it’s time to find the best fundamentals and focus on building a product:”
“It is time for traders to deploy their cash reserves to gain an advantage in the next bull cycle. As always, the winners in the bull market are the people who built the bear market.”
Game Maker on the Metaverse Neo Tokyo gaming platform Alex Becker repeated Ye’s notion in a tweet on Saturda. He also believes that bear market buyers are the ones in the best position to profit during the next bull. He said that “all money is made by buying in a bear market. Most losses come from buying in a bull market.”
Related: Bitcoin’s Little Whales May Be Preventing BTC Price From ‘Capitulating’: Analysis
Becker added that although buying low and selling high should be the key factor driving crypto market participants. Additionally, he suggested that people on Twitter are the most unpleasant during a bear market, which he called “ironic.”
The funniest thing I’ve ever noticed about crypto twitter is that everyone gets toxic and bitter in a bear market.
Which is ironic because all the money is made by buying in a bear market.
Most losses come from buying in a bull market.
It shows how gross this place is.
— Alex Becker (@ZssBecker) May 27, 2022