Market cleansing bear cycles are healthy say industry experts
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Analysts say the crypto bear market should not be feared because it offers potentially greater opportunities for growth and profits than a bull market, so traders should be taking note.
Crypto markets are undeniably bearish, but some industry insiders believe these conditions will shake out the bad actors and create greater opportunities for future participants.
Traders tend to lament the negative price action and relative difficulty in 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 greatest gains when bullish sentiments return.
Polygon (MATIC) co-founder Mihailo Bjelic told CNBC on May 27 that the current downturn and recent major sell-off earlier this month were just what the market needed.
Bjelic believes that the market became “maybe a little bit irrational, or maybe a little reckless,” as the total crypto market cap grew by 12.5 times between November 2019 and November 2021, a tremendous growth rate that outpaced most other traditional markets.
“When the times like that come, [a] correction is normally 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, total market cap has dropped by 60% from $3 trillion to $1.2 trillion according to CoinGecko. Cointelegraph reported on May 28 that traders still expect more pain, especially considering the last bear market drew prices down about 80% overall.
Crypto market analyst The DeFi Edge added context to the idea that bear markets carry benefits that remain in line with the interests of most market actors. The account tweeted to its 164,000 followers on May 29 that “bear markets are healthy for the growth of crypto.”
This line of reasoning is based on the observation that fewer new market participants, which scammers see as potential targets, enter during a bear. Over the last year, Bitcoin (BTC) transaction volume peaked on Nov. 9 at 335,411, coinciding with the peak in price. On May 29, transaction volume was down by 38% to only 207,859 according to Blockchain.com.
Lower activity means less opportunity and reduced profitability to run many scams, so they tend to disappear.
Bear markets are healthy for the growth of Crypto.
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