The Comparisons Between the 2018 Crypto Bear Market and Now: Are They Useful?

The crypto bear market which began back in 2018 and lasted until 2020 can seem like a distant memory for an investor. While at the time it may have seemed like the market may not recover, the bull market which followed saw a number of coins flourishing. 

There were, of course, some hype-train investors who had jumped at the first sign of trouble, but the volatile nature of cryptocurrency is simply a part of its nature. The river can ebb and flow, but it always heads in the same direction, and the ocean of crypto’s future is said to be deep with opportunities. 

That’s not to say things don’t get a bit tricky along the way. Although many investors saw out the icy plains of the first crypto winter in time for the beds to warm and the water to flow, over the last few months the cryptocurrency market has run into some more difficulties. In November 2021, the price of Bitcoin hit an unprecedented high of nearly $69,000. Today, its price sits around $17,000 and, if predictions are to be believed, we are about to head into another winter which could see its price fall even further. 

So How Do You Prepare For Another Cold Patch?

In Wall Street terms, the dipping of equity markets is referred to as a bear market, where the valuation of assets hibernates until the horizon looks brighter and the markets begin to flourish again. In terms of the cryptocurrency market, this is a good chance for investors to separate the wheat of their portfolio from the chaff, ensuring that they can take advantage of the bull market when it rears its head.

While many inexperienced crypto traders will make unsteady, foolish decisions, traders with a clear, concise plan can lay out their portfolio and minimise risks by being clinical with investments and sharpening their strategies.  

But How Do You Know How To Minimise Risks?

The positive aspect of going into a second crypto winter is that there has been a first one. In this way, you can either look back and learn from how you handled the initial bear market or, if you have recently become involved in the crypto community, you can search for comparisons and draw out a plan on how you can utilise them.

Looking at Bitcoin specifically, in 2017 it reached an all-time high of $19,000. When the bear market kicked in, it collapsed to a low of $3,200, which is equivalent to a drawdown of 83%. In today’s bear market, Bitcoin has so far fallen over 70% from its high of $69,000 in November 2021. If it was to match the drawdown in 2017, then you can foresee it falling as low as $11,400 by the time the bear market is over. Similarly, you could predict that another six months of decline is potentially on the table, seeing as Bitcoin’s last bear market lasted a total of eighteen months. 

What About Ethereum Comparisons?

For Ethereum, too, the comparisons between the last bear market and today’s winter can similarly shed light on how you should prepare your assets. Ethereum fared worse than Bitcoin between 2018 and 2020, with an all-time high of $1,396 collapsing to a low of $86 over the course of one year, which is equivalent to a 93.8% decline. This year, ETH has fallen from a high of $4,812 to $896, which is a drop of about 81%. If it was to match the drawdown in the last bear market, it could fall as low as $292, which would be a further 67% drop. 

It is worth noting that, although this may seem like a bad situation, Ethereum’s future is still set to push the coin considerably higher than it has ever been before. This is due to the merge which is still on track to take place over the next two years. The merge involves a move to a proof-of-stake (POS) consensus mechanism, which has led experts to believe Ethereum will emerge as the leading cryptocurrency over Bitcoin. In this way, it is important to consider the factors which can alter the price of Ethereum after the crypto winter. If you are currently undergoing a hodling strategy with ETH, then it is still a safe bet to hold on to the coin and trust in a positive bull market when the merge has been completed.  

How Are These Comparisons Useful?

These comparisons are useful because they give you a base point for the research you will have to undergo to survive the bear market. The similarities and differences between this winter and the last one can not only allow you to draw out a timeline but also predict how the coins are going to be affected, where they could fall, how far they could fall, and how high they may rise when the bull market comes around. 

This will help you draw out strategies, whether that is DCA (dollar-cost averaging), shorting or the diversification of your portfolio. Predicting how ‌a bear market will play out isn’t easy, and obviously, no bear market will be exactly the same (especially given external factors which have led to this particular crypto winter), but noting the comparisons between the two can give you an idea on the right moves to make and how you can benefit when the market eventually recovers. 

It is worth noting, however, that if you are planning to short sell your BTC or ETH then you should be assured of your investment capabilities. Shorting is ordinarily reserved for the most experienced of traders, because of its inherent risks and the possibility of liquidation. If you are inexperienced, then it is best to avoid this, as you do not want to make an already difficult situation even more ugly.

For any market, however, research is critical to survival. No one can tell you how to use the facts and figures, but it is up to you to acknowledge them and work out the best strategies to move forward. It’s your own assets at stake, so you should ensure to take everything into account and keep your eyes set on a profitable future.