Bitcoin: The Cryptocurrency That Has Never Entered a Bear Market

Source: Exame Original Title: Bitcoin: the cryptocurrency that has never been in a bear market Original Link: Emotions affect all of us because the market fluctuates every day, even if the closing price is the same at the end of the trading day. Whether you are a trader or an investor, you are impacted daily by market volatility.

The greater the volatility, the greater the euphoria or fear. The greater the uncertainty, the greater the volatility.

In fact, this article shouldn’t need a lengthy explanation for why Bitcoin has always been in an uptrend, but it does require a lengthy explanation for why so many people lose sight of their investment fundamentals and fail to step back and look at the big picture. The chart below speaks louder than words.

Bitcoin against the US dollar has never been in a bear market; in fact, it has been rising since 2009. From the perspective of historical highs, the declines may seem large (80%-90%), but they are still not enough to classify it as a bear market asset.

How to define a bear market

By definition, a bear market is a price regime where prices are suppressed because reality has worsened and expectations have also deteriorated. Reality is reflected through asset valuations, prices, macro factors, and other valuation metrics—all of which point to the same conclusion: the market pays lower prices because risk has increased and growth has evaporated.

Does this apply to Bitcoin? I would say it does not. Neither valuation nor macro factors are sufficient to support the argument that Bitcoin’s growth is over. On the contrary: its fundamentals and the global economic reality further reinforce Bitcoin’s potential.

All the logic that strengthens Bitcoin—interoperability, scarcity, and decentralization—make it a more powerful asset than ever. The way the world prints money and how governments frequently abuse citizens’ assets only further strengthens the case for cryptocurrency.

Now, in the short term, prices can indeed give the impression of doomsday. In the short term, bear markets do exist, but they also pass.

Why do people lose their way in investing?

Because they forget the fundamentals that justified their initial investment. They forget Bitcoin’s fundamentals and end up swayed by short-term narratives and ad hoc explanations for micro-movements spread by the media. They are driven by the fear that “this time Bitcoin will really collapse.”

History shows (in the chart above) that the cycles are clear: expansion and contraction. When Bitcoin reaches new highs, strong pullbacks often follow. When there is a 70%-90% drop from the previous historical high, it is usually a good time to accumulate tokens.

How do you know when Bitcoin will collapse?

As with any investment, you should abandon it when the fundamentals that justified it no longer exist. If the network is compromised, if more Bitcoins are printed than the protocol allows, or if the asset, for some reason, is no longer decentralized—then the fundamentals are gone, and the investment should be ended without hesitation.

This applies to all asset classes. Until then, whenever the market is in panic, take a step back. Don’t act impulsively. Review the fundamentals that led you to invest.