A downtrend in the market does not have a fixed duration and can vary depending on various factors. Based on historical price data, many believe that the cryptocurrency market experiences a downtrend approximately every four years. These downtrends can last for several months or even one to two years.
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What is downtrend ?
A downtrend is a trend that indicates a gradual decrease in prices in the financial market, or more specifically, the value of a cryptocurrency token.
The characteristic feature of a downtrend is that it creates lower highs and lower lows over time. In a downtrending crypto market, it appears likely to continue declining until certain market conditions change.
As long as the price continues to create lower lows and lower highs, the downtrend is considered to be intact.
Once the price begins to form higher swing highs or higher swing lows, the downtrend is temporarily halted, and the market needs to be reevaluated.
Why is the crypto market down
Economic and political news: Information about domestic and international economic and political situations can affect the development of industries and businesses on a macro scale, thus impacting the blockchain and cryptocurrency sectors.
Foreign exchange market: Fluctuations in currency exchange rates can affect the prices of tokens in the crypto market as users seek to diversify their investment portfolios using various tokens.
Interest rates: Adjustments in interest rates set by central banks can influence the borrowing and investment costs of projects in the crypto market.
Business conditions of projects: The business model and profitability of blockchain projects also significantly impact the price trends of their tokens.
Technical factors: Technical indicators, such as moving averages and support and resistance levels, can influence market trends.
Tools for identifying trends in the Crypto market
There are many tools for measuring trends in the crypto market, with the most popular ones including:
Price chart: Provides information about the price of a cryptocurrency over a specific period. Investors can use the price chart to determine the trend of the crypto market.
Japanese candlestick chart: Helps investors identify market trends based on patterns formed on the chart. Japanese candlestick charts can provide information about the volume and price of a cryptocurrency.
Moving average: Assists investors in determining the trend of the crypto market. This tool calculates the average price of a cryptocurrency over a specified period and uses it to gauge the trend.
Trendline: This tool connects the lows and highs of the price chart and helps investors identify the market trend. When the price of a cryptocurrency follows a trendline, it can be a crucial point for buying or selling.
Relative Strength Index (RSI): Used to measure the strength of a cryptocurrency and identify market trends. This indicator provides information about the overbought or oversold levels of a cryptocurrency.
Here are some tips for making cryptocurrency investment decisions:
Deciding to invest in the cryptocurrency market is a serious decision, and below are some tips to support your decision:
- Technical Research: Study technical indicators and market evaluations to better understand the trends of the Crypto market. Technical analysis tools such as chart analysis, moving averages, and support and resistance can help you make more accurate investment decisions. The Trading 101 section on Coin68 can help you get acquainted with technical analysis.
- Diversify Your Portfolio: Do not invest all your money in one type of cryptocurrency or a single crypto fund. Spread your investments across different cryptocurrencies to minimize risk.
- Adjust Over Time: The Crypto market often fluctuates quickly and can change unexpectedly. Adjust your investment strategy over time to ensure you are investing in cryptocurrencies with the best potential.
- Always Learn More: The Crypto market is a competitive and rapidly changing field. Always learn more about new cryptocurrencies and new trends in the industry to make the best investment decisions.
- Don’t Invest More Than You Can Afford to Lose: The most important thing is not to invest more in the Crypto market than you can afford to lose. Set a risk limit and adhere to it to avoid losing your money.
