June 16, 2020 |James Messi
The cryptocurrency markets haven’t experienced a true bull run since the end of 2017. Historical market cycles suggest that the next one may be just around the corner. In this article, we’ll explain everything you need to know about bull runs include: what it is, when it may occur, and how to properly prepare yourself in the event that it happens again.
What is a bull run
A bull run is a term used to describe a prolonged period of time when the price of an asset trends positively. This could be due to a number of reasons. In mature markets, often an overall positive sentiment spurred on by good macroeconomic data or trade news can lead to a consistent rise in prices for a period of time. An example of this would be the 2017 Bitcoin bull run when the price went up from around $1,000 to $20,000.
What is the likelihood that a bull run occurs soon?
A bull run can never be predicted with 100% certainty. All that someone can do is use the data available to construct a convincing case and a prediction.
Comparing the current price of Bitcoin to the cost of mining can be a good way of predicting when pressures will force price action. The block reward that miners get is the primary incentive (besides transaction fees) for miners to validate the blockchain. If it costs them more than they stand to make from the block reward, they will cease to mine. If that happens quickly, then the blockchain won’t have adapted to it, the hash rate will fall, the proof of work number (nonce) will take longer to be found and congestion will occur on the blockchain. When congestion occurs, fees go up.
In order to stop this, there’s normally a margin between the value of the block reward and the cost of mining in order to ensure the fine working of the blockchain. Therefore, when the cost and price converge some suggest price action will follow. Due to the Bitcoin Halving (block reward halved) that happened recently and is an intrinsic part of the Bitcoin protocol, this argument is more potent than ever.
Many have called the bull market before and for the last 12 months, all price trends have been short-lived. It’s clear that the appetite for a bull run far outweighs the evidence for one. Wishing one into existence won’t make it happen.
Tips for preparing for the next bull run
The following tips will help you to be prepared in the event that a bull run in the digital currency markets occurs. First, get a good understanding of much money you are able to risk. You must also keep you emotions in check to avoid being manipulated by the hype of the moment. Finally, when you know what you can risk and you’re in the right headspace, start to research which products you should be trading or investing in.
1) Don’t invest more than you can afford to lose
Just like gambling, you could lose the entirety of your starting capital if you risk too much. There are many historical examples of people taking out all their life savings and putting them in risky assets only to lose it all. The basic question you have to ask yourself is; ‘Will you be able to recover if you lose 100% of your capital?’.
Bull markets can be long or short and even the best economists and technical analysts are often wrong in their predictions. So, the advice given overwhelmingly in this space is to invest sensibly by budgeting correctly and making sure all your liabilities are covered before dipping your toes into the markets.
2) Don’t let human emotions cloud your judgment
Bull markets aren’t just single price spikes, they’re continued upward trends. The difference being that the price movement is likely to have a series of pullbacks despite trending up. It would be easy for investors to see a quick pullback and think it’s a change in trend. To maintain their profits, they might then sell their position due to fear. Considering the upward trend, that investor might have lost out on a large profit because they gave in to primal human feelings of fear.
On the other hand, the same is true of greed or ‘FOMO’ (fear of missing out). When the price of good spikes, an investor may think it’ll spike even more and so buys at the very top. Later, the price falls down and the investor is making a loss. He might then sell his position and make a negative return.
The overarching principle is that in a fast-moving market, you should not let your greed or fear force you into making masochistic mistakes.
3) Research products you want to invest in
Foundations are key in your preparations before the bull run. Most investors keep an eye on a number of projects that they believe have extreme upward price potential. When prices start to increase rapidly it might be that the bull market has already started. Although it may not be too late to invest in these projects, you may have missed out on some of your potential profits. Prices may then move so quickly that you haven’t enough time to do your full due diligence. That’s why it’s advised to do your due diligence on projects you like before the bull market begins so when news comes out you don’t have to do a large amount of background research. Instead, you can act on the news as it occurs and save time and perhaps not miss out on opportunities.
In addition, when the bull run happens, a plethora of new projects will become known. Some will have big updates and others will spike in price. When that happens, a bubble may occur when people buy into a project that they don’t know enough about or fully understand. In order to avoid bubbles and to stop them from occurring altogether, it would be wise to find educational resources that you can rely on to research new companies and tokens so that you have faith in investing in that project.
Some examples would be Investopedia, they don’t necessarily have the resources for research of any individual company but they can give you the tools to do it yourself. Youtube is also a great resource for financial information.
Get prepared for the next bull run on Beaxy
We’ve got a great token that has real utility. Make sure you do your due diligence and keep an eye on it in the next bull run.
Starting an account on Beaxy is a great first step. The process is simple. Simplyand fill out your information.
Once you’ve registered, pass your KYC verification. We put a video together on how to help you. You can find that video here.
Finally, connect your bank and you are ready to make your first purchase! We hope this article has been helpful in explaining the relevance of Bitcoin to your retirement account. For any additional information you may want, don’t hesitate to contact us at support.beaxy.com