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Can we know when this bear market from hell will end?

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If someone tells you they can predict financial markets, one piece of advice: run away. No one can boast of having complete knowledge when it comes to stock markets. Even though traders can follow certain trends and rely on certain criteria, the fact remains that it remains fundamentally a game of probability.

So, is nothing certain? Can we predict anything? Well, actually, sometimes we can foresee certain broad strokes without it necessarily being a matter of intuition. There are a few elements that, taken together, can indicate how events will unfold. For example, the collapse of the FTX platform was predictable to many serious players in the field, including the CoinDesk newspaper and influencers (like BitboyCrypto) on social media, many weeks before the disaster. Yes, you read that right: "predictable."

Anyone who tells you otherwise and talks about unforeseen events or a " Black Swan " scenario is surely trying to excuse their own blindness. Don't be fooled; they might stop taking you for fools.

The fall of FTX was like the icing on the cake of a bearish year; The year 2022 was the ultimate hangover year for traders who benefited from a superb rally in the years 2020-2021. The stampede had to stop, you might say. And, it stopped…Yes, suddenly.

Let's see in this article how it all started, to try, as much as possible, to understand when this endless bear market from hell can stop...

The bear market, a refrain?

Many industry experts believe the bear market began with the brutal implosion of Luna, founded by the highly erratic (the word couldn't be more apt) Do Kwon . Again, if someone tells you this wasn't predictable, get out your tissues. When dozens of influencers were promoting the Anchor protocol, which offered a whopping 20% return on the UST stablecoin, it didn't take a genius to foresee the impending crash. Sure enough, a few flimsy excuses were all it took for experts of every stripe to discreetly don their cryptocurrency salesman personas. Even Ponzi himself wouldn't have dared.

In short, the domino had just started and since then, we have lost count of the number of companies that have gone out of business, leaving investors with nothing but their eyes to cry.

However, it's not as if the cryptosphere isn't used to these kinds of scandals. Since 2014 with the sudden closure of MtGox, investors have known that you can get your fingers burned with cryptos.

What I mean is that periods of recession are part of the hazards of the crypto market. There can only be upward periods. The stock market is by definition a continuous series of rising and falling markets and trading consists precisely of knowing how to position yourself in this terribly delicate game of trends.

For cryptocurrencies, it's the same. There have been and will continue to be bearish periods. Let's now look at a little history of the bear markets that the crypto world has experienced since 2011. Let's try to find a plot, if there is one...

A brief history of crypto bear markets since 2011

⬇️ In 2011, the price of Bitcoin plummeted from $32 to around $0.01. This is what's known as a precipitous drop. It frightened many investors who concluded that Bitcoin was dead. While Bitcoin had taken three months to reach $32, the loss of over 98% of its value occurred in just a few days. The crash was triggered by the hacking of the Mt. Gox platform.

⬇️ In 2015, the bull run between February 2013 and November of that year came to an end. It was an epic year that attracted many investors because Bitcoin had gone from $32 to $1000 in just a few months. It was at this point that many media outlets began to take a serious interest in Bitcoin as a speculative asset. In 2015, the market experienced a bear market that brought Bitcoin down to $170. This was due to the Chinese central bank's decision to ban the use of cryptocurrencies. The bank prohibited financial institutions, such as banks, from processing Bitcoin transactions. That same year, the Mt. Gox platform, still a market leader, had just suffered another hack…

⬇️ In 2017, the price of bitcoin reached its ATH, peaking at $20,000. It was clearly the year of great euphoria for bitcoin but also and above all for altcoins, notably ETH which reached the crazy price of $700. The year 2017 is clearly the year that attracted the most crypto investors. This is also the year when many influencer YouTube channels were created. The world of crypto influence had just been born, attracting more and more people into the ruthless world of crypto-assets.

However, in 2018, ETH was worth around $100 while Bitcoin was trading at $3000. The bear market had struck again, and once more, it was partly due to a hack of the Japanese exchange platform Coincheck . The bear market was so violent and bleak that this period was dubbed the "crypto winter."

This was the most devastating bear market to date, wiping out countless crypto projects in just a few months. It was also a pivotal year for crypto marketing, as Facebook and Google banned cryptocurrency advertising. There were so many ICO scams in particular that regulators wanted to protect novice investors. This led crypto companies to use influencers, sometimes unscrupulous (and often with little to no training in finance and economics), to promote their tokens. The era of "shitcoin" and shilling was born. The lucrative market for crypto influencers was about to solidify.

In 2020, the world suffered the wrath of the covid 19 pandemic, which was beneficial for online purchases... It was above all a blissful period for cryptocurrencies which experienced the most beautiful bull run in its history. Metaverses, NFTs, crypto-assets, protocols of all kinds, it has been a party of easy profits on several levels for all players in the crypto industry.

Then, in February 2022, Russia's invasion of Ukraine shook the global economy. During this tense period, the Anchor protocol offered a 19% yield on the Terra blockchain's UST stablecoin, with no lock-up period. Naturally, such a yield attracted a huge amount of capital, and both individuals and businesses were enticed by the prospect of profit. More than 50% of the UST in circulation was deposited on the Anchor protocol… The massive sales of UST then significantly impacted the price of the Luna token to which it was linked. This could have been a minor storm, but it's important to understand that UST was an algorithmic stablecoin intrinsically linked to the Luna token. As Luna lost value, Luna's depreciation led to a sharp drop in UST's value, causing it to abruptly lose its peg to the US dollar.

Even today, the domino effect of the UST crash is still being felt. The Terra blockchain crash triggered various bankruptcies and implosions in the crypto world, culminating in the recent collapse of Silicon Valley Bank …

Why do bear markets happen?

As in traditional finance, markets undergo different interactions and there is never only one factor that can explain the start of a recession. However, in the crypto market, which is still recent and relatively little connected to the real economic world, we can observe that there are two major factors which are often at the origin of bearish trends.

Typically, security and regulation are the two elements that, especially if combined, can have a huge impact on the market. In any case, for the declines in 2013 and 2018, both factors are invoked.

? The security problem

Regarding security, consider hacks and breaches. This is one of the most significant and serious problems for the crypto ecosystem. Whenever there's a crisis in the history of cryptocurrencies, it's very often linked to a loss, a hack, or a breach. When people are afraid of losing money, they naturally try to withdraw. The worst thing about cryptocurrencies is that there's generally no insurance in case of bankruptcy. In traditional finance, central banks or governments always bail out the banks, as we saw with the collapse of BlockFi or Celsius, for example. No refunds. Investors lose everything, like in a casino.

The current market downturn isn't necessarily due to a security issue. It goes without saying that the FTX crash highlighted a latent fear among investors, but the bear market had already begun… However, the FTX crash sounded the alarm. All the investors who lost money in this unspeakable fiasco, led by Sam-Bankman Fried, are still reeling. This has had far more serious repercussions in the minds of investors than one might think… In the minds of many, his image as a con man and value baron is now inextricably linked to the crypto industry…

? Change in law and regulation

Here again, we see a classic pattern that partly explains the bear markets in the crypto world. Many governments have sought to ban cryptocurrencies. We remember China's numerous attempts to prohibit their use before trying to limit the work of Bitcoin miners. Nigeria and Algeria also advocated for banning cryptocurrencies within their borders.

Announcements from various governments have often had a downward impact on the market. Of course, we do not need to explain the terror that this can create among professionals in the sector on the one hand and retail investors on the other. This irrevocably disrupts the market and slows down its development. Many countries cannot enjoy a thriving crypto ecosystem precisely because of unclear or inadequate regulation.

However, over time, a reverse trend has emerged as the crypto industry has become increasingly mainstream. More and more established financial institutions have invested in Bitcoin and other cryptocurrencies, and numerous brands—with the rise of metaverses and NFTs—have positioned themselves as crypto-friendly. Consequently, there are a growing number of countries that can be considered crypto-friendly, with policies that benefit both businesses and crypto holders.

—> Read the article: The 10 most crypto-friendly countries

Will the 2022 bear market continue?

We can see some similarities in the occurrences of markets going down. Finally, we can even comment on the temporal spaces by saying that this happens approximately every 4 to 5 years (2013,2018,2022 therefore).

As for duration, we can generalize and say that bear markets last around 20 months. However, remember that this bear market was not directly caused by a hack or security issue. We can trace the start of the bear market to the start of the war in Ukraine. It was at this precise moment that the prices of cryptocurrencies began to plummet.

It's usually said that the crypto market isn't directly correlated with traditional financial markets. What we've observed this time is that, in reality, this correlation is becoming increasingly effective and real… We saw this recently with the collapse of Silicon Valley Bank , which caused the USDC stablecoin to plummet for a few days before recovering thanks to a rescue plan …

Thus, the bear market for cryptocurrencies in 2022 is strongly linked to the traditional economic market. While the Federal Reserve decided to increase interest rates, investors stopped investing in crypto-assets, considered riskier.

Then, you know what happened next: the scandals, the thefts, the scams, the shilling by uncultured promoters, the frauds then fomented a huge feeling of widespread FUD…This caused investors to desert even more, becoming ever more reluctant.

When will this bear market end?

The bearish period and the fall of large crypto companies will leave an indelible mark on the minds of investors. The loss of confidence is so deep that it will take a long time to regain it…

Ah, you've read this far! Do you really want to know when this bear market will end? Well, I don't have a crystal ball and I don't really have an answer to that question. Although we can assume that if the federal authorities relax the rate, cryptocurrencies could rise again…

To take up Paul Krugman's theory, we must understand that "crises always come back" and that bear and bull markets are part of the "life" of the financial market. Like on an electrocardiogram, if there are no more cycles, it is because there is no more life...QED, eh.

That's how I'll conclude this article, hoping that this bear market is clearer for you. I would like to add one thing, however: remember to distinguish between cryptocurrencies on the one hand and Bitcoin on the other.

As we can currently observe, following the recent financial turmoil in the banking sector, Bitcoin is performing rather well. This was also evident in our 2022 year-end review . In times of crisis and turbulence, Bitcoin consistently demonstrates its resilience.

By the way ...

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