- Crypto bear markets are not usually welcome beasts, but there are always silver linings
- This crypto winter will be beneficial for the space in a number of ways
- Crypto can come out the winter stronger than ever
Crypto bear markets are traditionally unpleasant for all concerned, but they do have certain advantages. Crypto bear markets have traditionally a time to weed out the perpetrators of excessive behaviour and strip out the weak from those who really want to build, and survive. Each bear market is different just like every bull market is different, and in this piece we look at three specific factors that will lead to crypto being in a better place when it comes through the crypto winter.
Regulations in Place
The entire crypto sector is crossing something of a regulatory Rubikon, with countries all over the world tackling the issue of crypto usage, movement and taxation. Many of these discussions will result in new laws and frameworks being established and implemented as the crypto bear market trudges on, including the crypto component of the U.S. Infrastructure Bill and the sweeping changes imparted by the EU Parliament.
These new regulations will have time to bed in and become accepted by the crypto community, even if they aren’t welcomed. Some who are particularly against them may quit the space altogether, leading new players to join the space, emboldened by the security of knowing that the market is more regulated than in previous years.
The pricing shock of these, and other, regulations will be absorbed in a bear market when no one cares about crypto anyway, meaning that by the time people do start to care again they will have become the norm and will not impact anything.
Crypto Contagion Cleanout
The crypto contagion, caused by excessive risk taking with nine-figure hedge funds among other smaller players, has led to exchanges, lending platforms and more struggling to survive, and in many cases going under entirely.
A bear market will clear out all the contagion running through the space (unfortunately taking many individuals with it), resetting the table for more responsible practices next time round. Of course there will still be those who leverage trade unwisely, but these individuals are responsible for their own money, not other people’s.
The Bitcoin Cat is Out of the Bag
The headline in the 2020/21 bull market was the adoption of Bitcoin by not just institutions but entire countries. El Savador is of course the leading example (although there is some doubt about how well things are actually going in that respect), but the Central African Republic is also adopting bitcoin as legal tender. What other countries might use the bear market to research the possibility of adopting Bitcoin?
Then of course there are the institutions. Bitcoin was picked up by more institutions than ever before, with many now realising its potential as an investment. It has also shown its ability to bounce back again and again, so how many big players are loitering in the depths of the bear market to scoop up cheap bitcoin? Of course we won’t know until the bull market begins proper, but we can be sure that interest is going to be higher than ever before, which will only end one way…
Three Cheers for a Crypto Bear Market!
As we can see, there are some very good reasons to cheer a crypto bear market. Just make sure you’re working your butt off to earn enough to put into the space when the good times roll again, because this time they could be epic.