The 2018 cryptocurrency bear market has been a wild and volatile ride which was made even more difficult by watching the booming success and profits in the traditional stock markets.
Lately, however, the cryptocurrency market has seen a bit of relief from the bears just as the DOW Jones Industrial Average (DJI) and the NASDAQ (NDAQ) have recorded their greatest weekly losses in nearly a decade.
There is no shortage of investors and economists alike who believe that time is almost up for the bulls in the stock market. Since beginning a recovery from the 2008 housing market collapse and subsequent recession, the DOW and Nasdaq saw whopping 310 percent and 470 percent gains to their all-time highs, respectively.
A Fair Comparison?
The total market cap of the cryptocurrency market is significantly smaller than that of DOW or NASDAQ, arguably making it more difficult to compare or analyze patterns between the markets.
It is an interesting notion, whether cryptocurrency prices will also be negatively affected in the event of a major economic recession or if digital currencies will fall more in line with precious metals. Gold and silver have historically performed well in recessions as a store of value, and investors may look to move out of stocks and into cryptocurrency before the storm really hits.
For comparison’s sake, Bitcoin corrected 84 percent from the gains made since its inception in 2009 — the exact time that the traditional markets were starting to turn around. Considering the same time frame, an equivalent loss in the DOW would bring the value to the 10,000 point range while the Nasdaq would fall back to the $30 level.
Against the Grain
Cryptocurrency investors are hoping to strike it rich in the event of a bear market in the traditional markets. Large influxes of capital moved from traditional markets into cryptocurrency could have the potential to help stabilize the market and allow for new, healthy growth and could even be a catalyst that sparks another fierce bull run.
On the other hand, if stocks plummet and cryptocurrency prices follow, the current bear market could stretch on exponentially longer, causing further capitulation and hopelessness.
Smart investors in either scenario will be on the lookout for opportunities to accumulate in these maximal profitability zones and diversify across many different markets if need be.
Do you think a major economic recession will hit sometime in the next few years? Will cryptocurrency prices be directly or inversely affected? Let us know your thoughts in the comments below!
Images courtesy of TradingView.