Why a Bull Market Can Be Just as Risky As a Bear Market

Bitcoin just broke its sideways trading pattern to transition into a rising wedge last week. All cryptocurrencies followed suit, and since then, we’ve seen a massive spike in many coins. This drastically affected a market that was previously bearish. While we’re unlikely to be in a bull market at the moment, the overall mood of the market is clearly positive, which is evident in how people are much more likely to buy Bitcoin. People are coming back to trade, and they are significantly bolder than they were in the past month.

Many people have the wrong notion that a bull run is a good thing. The truth is that a bull run is just as risky as a bear market, since market confidence is high, which often erodes reason. People tend to keep throwing money at the market during a bull run, which is extremely risky behavior, especially since the more you expose your assets, the more likely you could fall victim to a pump and dump scheme and end up losing a significant amount of money. Here are some things you can do to minimize risk.

DIversify Your Assets

During a bull market, a wide variety of coins are likely going to keep pumping. However, the more you risk your position on a single coin, the higher the risk that you could lose money because different coins perform at varying levels. Diversifying your assets allows you to still catch pumps, while also minimizing your potential losses. One coin may fail, but another one might compensate for your lost money.

Don’t Chase the Pump

Pumps are often followed by massive dumps, which is why you should never increase your exposure to an asset that has already hit high values. You have to consider that market values are constantly changing, and you’re unlikely to catch gains if you’re late to the party. Keep in mind that the higher the pump, the more likely the dump. If you really must do so, make sure that you invest only what you can afford to lose.

Bear Markets Are Inevitable

Bear markets are unpredictable and unforeseeable. It’s difficult to determine when exactly they’re going to start, which is why investors should always be wary of any news that could alter investor mood. Bull runs don’t last forever, and even something as seemingly trivial as news that could affect the positions of investors can have a  massive impact on the market.

A prime example of this is the news that the federal government is planning to increase interest rates in 2022 in an attempt to curb inflation. This news triggered a wide-spread sell-off that even affected the crypto market.

Cryptocurrency trading is a risky business and it should be done with utmost care. While the market is indeed very volatile, the inherent risks of crypto can be managed with vigilance, proper research, and a little bit of luck.