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What Is A Bear Market? How Does It Affect Us Today

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It feels wild out there right now. Record high inflation, job reductions, stocks and crypto falling crushing a lot of dreams. What exactly is going on? Can we go back in time and try to understand this?

We can!
But it’s also important to note that every market has its own unique conditions and this one has many fronts which are new to us but also many that are normal. Let’s try and understand this a bit by understanding what a bear market is and taking what we know so far.

What is a bear market?

A bear market is triggered when there is a 20% decline from the peak. Since 1928 this has happened a total of 26 times or about once every three and a half years. Take into account that our markets have been in a steady rally for years now.

The sell off that happened during the lockdown of covid most likely was the catalyst that started the sell off. It most likely was coming soon anyways. The economy was slowing for years before that. This is a NORMAL cycle and one that continues to happen. What would be weird is if the markets just continued to go up and up and up. At some point a reset needs to happen and those of us in crypto have seen this many times.

The History Of The Bull and The Bear

The chart below goes from 1928 to 2018 as the latest update but you could add on another 3 years on the to bull market which was propped up by the fed. From there you would add in a bear market for 6 months.

Averages Bull markets last on average 9.1 years and have a cumulative return of 480% Bear markets last on average 1.4 years and have a cumulative loss of -41%

So let's break this down...

1929 - Dow crashes 90%! The worst ever crash that lead to the great depression that lasted 10 years! That's the first orange bear market you see on the graph above.

1937 to 1941 - This bear market was most likely caused from the contraction of the money supply caused by the fed and treasury department policies.

1960s - 1970s - The bear market caused a 68% drop over the years it was in effect and most likely was caused from the Vietnam war and social programs increased government spending the fed they responded by tightening credit conditions. This caused the markets to fall and see record high inflation rates that peaked at 14%.

2000-2002 - Often referred to as the dot com crash came in at about 33% decline while tech stocks were hit the hardest at 78%

2007-2008 - Often referred to as the housing market crash saw one of the biggest recent declines of over 50%

This puts us into what has been one of the longest running bull markets. Now in about year 12 or 13 a natural bear market was meant to happen and most likely would have happened during the lockdowns of covid and that would have been ok and expected! However the bailouts artificially propped up the markets to the point of things just getting insane. This could potentially mean for a even larger hit being that this was a world wide event that took place.

As of writing this markets are down around 25% from their highs and when we look back at history we can see that a bear market on average will see a correction of about 35% that means 10% more would take us to the average which would bring us to 26,000 on the DOW and around 700billion in the crypto markets.

Now this is all speculation, every market is different. Things that took place during those bear markets and not the same that are happening now. This time you have worldwide lockdowns, forgiveness loans, stimulus checks, war in Ukraine and the keystone pipeline are all contributing factors into what we have here today.

What You Can Do?

Things most likely will be rough and get worse for the next 6 months or a year. During that time some simple things you can do are not over react, cut down on unneeded expenses and in general just have good financial habits lowering your risks and living below your means.

Continue to earn crypto. I firmly believe crypto is still going to rally again. While it might not feel like it in the next 5 years I see us once again blowing past our pervious rally as new tech and reasons to invest in crypto come around. Right now we are in a reset where the trash is being removed and simply not smart investing is paying a heavy cost. But you can earn crypto still through a number of ways including right here by writing quality article like this on LeoFinance.io

It's crazy to think but in my lifetime in crypto since 2011 I've road three waves in prices and each time I've done one thing. I've continued to grow my fundamental core units and invested some of those dividend profits into other projects that were higher risk. However never jeopardizing the core assets I want to hold like hive, leo, bitcoin, ethereum. You make more long term money doing the non sexy thing when everyone else thinks it's all over.

Posted Using LeoFinance Beta