What a bear market looks like

After a turbulent weekend, Bitcoin, Ethereum, and other tokens large and small continued to fall sharply this week.

Bitcoin has fallen 30% in the past seven days, Ethereum has fallen more than 37% in the past seven days, and some small currencies are close to zero.

Under the extreme market conditions, Celsius Network, a crypto lending platform, announced on its social networking site that it would suspend all withdrawals, transactions and transfers. A few hours later, Binance announced the suspension of Bitcoin withdrawals. After that, German fintech company Nuri's Bitcoin interest-bearing product also suspended withdrawals.

Meanwhile, Bitcoin’s “Fear and Greed” index has dropped to 8, indicating extreme fear.

The bear is coming.

What a bear market looks like

Jason Yanowitz, co-founder of Blockworks, said: There are three stages of bear markets. We have just entered the second stage.

Phase 1: Relaxation. The excitement (and greed) of the bull market is still there. Mini-narratives emerge for weeks at a time. Assets still have a floor. Valuations are being revised down, but companies aren’t making hard decisions (killing products, laying off employees). Things seem OK.

Phase 1 *doesn't* feel like a bear market. It feels like prices have fallen back to "realistic" valuations. Investors continue to allocate, builders continue to build... and by and large, life is good. Only weak hands are selling.

Phase 2: Forced Capitulation. This is where it gets ugly. The narrative dies. Prices drop 90%…and then another 90%. Layoffs across the board. The mainstream media and cynics rise up in Phase 2. They laugh and shout “I told you so!”

Luna sends us into Phase 2. In Phase 2, Diamond Hands are forced to sell. They sell not because they want to, but because they have to. Celsius doesn’t want to sell – they may have to. There will be more funds, companies and individuals like Celsius in the future.

In phase 2, any rally will be immediately sold. Dead Cat Bounce. Companies that need high token prices will be crushed. Founders who buy their own tokens to sustain their projects…they will be crushed too.

The lower the price, the louder the bears become. The bigger the bears become, the lower the price goes. This creates a vicious cycle. In the second stage, the price plummets dramatically. Excitement is replaced by anger.

Stage 3: Endless Exhaustion. After the greatest pain comes the greatest exhaustion. No rallies. No narrative. Prices move sideways or slowly fall. It’s boring. At the bottom, anger is replaced by silence.

In stage 3, you’ll want to walk away. Regulators will kick us out when we’re down. Your favorite Twitter degens will go quiet. Web2 investors will quietly stop allocating. Talented builders will leave. Companies will shut down. You’ll question every one of your assumptions.

The third phase is the hardest to survive. If you are a company, do whatever it takes to survive. If you are a developer, stay interested. Find like-minded partners and build with them.

Don’t lose sight of the big picture. We are building an open, permissionless world. This will take decades, not years. Turn off your computer and go for a walk. Just don’t give up.

Has the market reached bottom?

Will it continue to fall? Is it time to buy at the bottom? These are the most common questions during a bear market.

Mike Novogratz, founder and CEO of digital currency company Galaxy Digital Holdings and billionaire investor, said that cryptocurrencies are closer to the "bottom" than U.S. stocks. Novogratz said at the Morgan Stanley Financial Conference that Ethereum should be around $1,000, but now it is $1,200, and Bitcoin is around $20,000, but now it is $23,000, so cryptocurrencies are much closer to the bottom. He believes that U.S. stocks will fall another 15% to 20%. The S&P 500 has fallen about 22% from its record high in early January, entering a technical bear market for the first time since the outbreak of the epidemic in March 2020. Novogratz said he does not think it is time to deploy a lot of capital, unless the Federal Reserve has to stop raising interest rates due to the bad economy or even consider cutting interest rates.

Arthur Hayes, founder of BitMEX, tweeted that since a large number of traders are shorting put options, they must sell spot to hedge Delta. When the strike price is close, filling the hedge position will lead to a large amount of selling pressure. Arthur Hayes believes that once Bitcoin falls below $20,000 and Ethereum falls below $1,000, the spot market will face pressure due to traders' hedging, and some OTC traders will go bankrupt due to the inability to hedge properly.

Edward Moya, senior market analyst at Oanda, said that people's sentiment towards cryptocurrencies is very bad as the global cryptocurrency market value has fallen below $1 trillion. If Bitcoin falls below $20,000, it may lead to worse price trends. As monetary policies are tightened in many parts of the world, cryptocurrencies have become a symbol of fleeing speculative investments, which has led to a depletion of liquidity in its global market.

PlanB said: "Some are waiting for Deep Blue. But we may not have Deep Blue this time. Deep Blue = 70% below Monthly ATH = 0.3*61K = 18K. Problem: 18K below 200WMA (22K), which has never happened before. Either we have Deep Blue and break 200WMA, or 200WMA holds and no Deep Blue!"

Financial KOL Zerohedge said that Bitcoin’s decline will not stop until Celsius Network is liquidated.

"Whether to copy or not" is a question that depends on one's own opinion.

Remember why you want to open a position

Anthony Scaramucci, founder of Skybridge Capital, which manages $3.5 billion in assets, has some advice for cryptocurrency investors on how to survive a bear market. Scaramucci told CNBC that he first advises people to "stay unleveraged, but stick to the rules of long-term investing."

Dovey Wan said: "In tradfi, we see a full cycle in 8 years or more. In crypto, we see one every 2-3 years, so we are 3 times faster, 9 times more learning, and 30 times more opportunities. I am lucky to be a part of it, with some of the smartest, most interesting, most creative and resilient minds of our generation."

Regardless of strategy, in a bear market, it is crucial to remember why we are building a position. Just as we firmly believe in the value of Bitcoin/Ethereum, the significance of the birth of Web3, and the importance of trustlessness/decentralization, we firmly believe in our choice.