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With the bear market finally showing signs of ending, many crypto investors are wondering if now is the time to start buying digital assets again.
Bear and bull markets are a staple of investment. They’re synonymous with trading cycles and are part and parcel with markets. A bear market is defined as a decline of 20% or more from recent highs, while a bull market is an advance of 20% or more.
There is no exact science to predict the end of a bear market and the start of a bull market in any investment niche. Until a few days ago, there has been little to no upwards movement in crypto prices. As the market stands today, a number of analysts are saying that the bear market in cryptocurrency may have finally come to an end.
Bitcoin, the largest and most well-known cryptocurrency, recently surged by over 8% at the beginning of the month for the first time since a low of $19,111 USD was recorded on Wednesday, July 13. This is a significant development because Bitcoin had been stuck in a standstill price range. Some other altcoins like ETH and ETH Classic have also posted above-average gains in the same time period.
While the crypto assets have not significantly cleared the resistance levels created during the bear market of 2022 (and may not do so for some time), the cryptocurrency market has regained some much-needed upward momentum. A factor in the recent uptrend is positive news across the global economy: a decline in oil prices, and lower unemployment rates.
The breakout of Bitcoin above its resistance levels is a positive sign that the market is ready to start moving higher again. Such improvements lay the foundation for a more widespread crypto market recovery and one which would clear the way for stock and cryptocurrency markets to return to more bullish heights.
If the stock market rebound continues and leads to an avoidance of a recession, it’s possible that crypto prices will also begin to recover. Investors who were spooked by the sharp decline in asset prices may start to feel more confident about buying again, and this could lead to increased demand for Bitcoin and other cryptocurrencies.
Economic data boosts stock markets, Bitcoin, and crypto
Any discussion of the cryptocurrency market and its behavior at the moment isn’t complete without a parallel discussion of the stock market, since crypto has indeed been taking its cue from equity markets this year. So, it should come as no surprise that the latest bearish turn in crypto has coincided with another drop in stock markets. The S&P 500 has been down, the Dow Jones Industrial Average is also down, and both the Nasdaq Composite and Russell 2000 are in the red.
Still, it’s worth noting that, despite the drop, stocks are still up significantly on the week. So, while there may be some bearish pressure in the near term, the general trend for both stocks and crypto appears to be positive.
As for what’s next, it will be interesting to see how stocks and Bitcoin respond to the latest bearish turn. If stock markets can hold their ground, or even rebound, that could bode well for crypto. But if stocks continue to fall, that could put additional pressure on Bitcoin and other digital crypto assets
Data from AI CIO suggest that BTC’s price correlation with the S&P 500 and Nasdaq reached 0.59 and 0.82 (respectively) in May 2022, this correlation value came close to an all-time high. So just as both of these indexes have fallen in 2022, so too have Bitcoin and other cryptocurrencies with it.
To put it more plainly, the same forces that have been driving down the stock market prices have also been dragging down crypto asset prices. But now that stocks have begun to rebound, it’s possible that crypto prices will do the same.
Could the stock market avoid a recession?
Recessions are caused by a number of factors, but one of the most important is a stock market crash. When asset prices fall sharply and quickly, it can trigger a domino effect that leads to businesses shutting down, layoffs, and a decrease in consumer spending. The last global recession was precipitated by the collapse of Lehman Brothers and the subsequent financial crisis.
The stock market has been on a roller coaster ride over the past few months, but it’s still well above its lows from March. If it can continue to hold steady or even increase, it’s possible that a recession could be averted.
However, there are signs that the stock market may be able to avoid a crash even though all speculation remains tentative. New technical indicators suggest that the global market economy may have turned a corner. More specifically, the technical data indicates that recession may not actually arrive, and even if it does, the results are not expected to be as harsh as previously feared.
In light of this data, investors are turning to Bitcoin and other digital assets as a possible safe haven investment. The logic is that if the stock market crashes, Bitcoin will continue to rise in value as people look for alternative investments.
Remaining uncertainty in the crypto market
Combined with technical indicators, which all say crypto has already hit its bottom, these fundamentals certainly point to a better future. Nevertheless, there is still uncertainty in the air. The bear market has taken its toll on crypto investors, with many people losing a lot of money. This is likely to make people more cautious in the future and less likely to invest heavily in digital assets.
Furthermore, it is not clear whether the current rally will be sustainable. The bear market has lasted for over a year, and it is possible that we could see another sell-off before the bull market really takes off.
Investors should therefore be cautious and not put all their eggs in one basket. Diversification is key, and investing in a mix of assets is always the best strategy. The bottom line is that the bear market may have ended, but it is still too early to say for sure. Crypto investors should be cautious and not invest more than they can afford to lose.
Disclaimer: This article is not financial advice. It is for informational purposes only. Always do your own research before investing.