How Long Will The Crypto Bear Market Last? A Look At Previous Downturns

With the cryptocurrency market in its fifth historic bear market that began in November last year, the prices of major tokens have fallen significantly from their all-time highs.

How long will the current bear market last is the question on everyone’s mind.

By analyzing historical data and merging observations from previous bad markets and recessions over the past 100 years, we attempt to provide an answer to this question.

What is the difference between the terms “bear market”, “recession” and “depression”?

We must first define these terms in order to understand what we are talking about.

bear market

When the price of a stock or cryptocurrency falls by 20% or more and the decline lasts for at least two months, it’s called a bear market.

Bear markets are common. On the stock exchange, they typically take place every three to four years. The intervals between bear cycles in crypto markets are shorter at around 2 years.

recession

A recession is generally defined as an economic downturn lasting at least two consecutive quarters, as measured by a decline in gross domestic product (GDP).

They occur on average every 10 years.

It’s important to realize that a recession affects more than just financial markets, although crypto bear markets often overlap with financial markets.

The overall economy slows down during a recession.

depression

A depression is defined as a three-year or longer recession.

The US downturn of the 1930s is an extremely unusual example of depression.

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Over the past century, several depressions have occurred in different countries around the world.

The current and historical economic crisis in the USA are presented in this chart.

It shows the extent of the S&P 500’s collapse and the duration of each bear market over the past 90 years.

This chart does not include the 2000 bear market as it lasted more than 600 days.

Compared to certain historical precedents, the current bear cycle for US stock markets that began in January 2022 could still be considered fairly benign.

Why consider the US stock market when analyzing the crypto bear market?

There are numerous parallels between the two financial markets.

Since the stock markets have a much longer history, there is a lot to learn from them.

Cryptocurrencies and US stock markets have a strong connection.

Therefore, it is very likely that a rise or fall in the stock market will also affect the crypto market.

In other words, anything affecting the S&P 500 will likely affect the crypto markets as well.

Based on the current data, we can draw initial conclusions:

Are we in a bear market?

Yes. Both the cryptocurrency and the stock markets have been recording huge losses for several months.

Have we entered a recession?

Yes. The global economy has only deteriorated since early 2022 and is now posting two consecutive quarters of negative growth, which is critical.

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And with the worst in store for the future, the recession could affect us well beyond 2023.

Are we in a depression?

Not yet. For this to happen, the current economic crisis would have to last until 2024-2025.

What have previous crypto bear markets taught us?

What else can we deduce from historical data if we are aware of our current economic situation?

An obvious first approach is to consider how long and by how much previous crypto bear markets have declined.

Market downturn 2011–2012

Duration: 185 days + months Sideways movement of the market.

Reduction: -40%

Bear market 2013-2015

Duration: 415 days plus months Flat market movement.

Reduction: -83%

Market Gloom 2017-2018

Duration: 365 days plus the months running sideways.

Reduction: -84%

Bear Market 2019-2020

Approximately 260 days.

Reduced by -62%

As we can see, the typical crypto bear market saw a drop of about 61% and lasted 306 days, plus a lot of sideways movement in the following months.

But this time it could be different

As previously mentioned, we are now entering a recession and this is the first time a crypto bear cycle and recession have coincided.

What possible implications can this have?

Bear markets in the S&P 500 are much shorter when they don’t coincide with a recession than when both happen at the same time.

Non-recessionary bear cycles in US stock markets typically last only a few months and result in losses of around 22%.

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The rehabilitation process typically takes 11 months to reach the previous high.

However, markets lose an average of 30% in value during a recession.

The average time it takes to recover to the previous high once the bottom is reached is 48 months.

Does all this mean that the current crypto bear market could be more severe and longer than previous ones?

Without a doubt it is possible.

Furthermore, given the general macroeconomic circumstances, a quick return to better market prospects is unlikely.

Any good news then?

Yes. Technical charts show some positivity.

The Relative Strength Index (RSI) for the month is at the same extremely low level as it was at the end of the 2013-2015, 2017-2018 and 2019-2020 bear markets.

This was a signal that the bottom was approaching previous bear cycles.

Conclusion

Based on historical data, it doesn’t seem like this negative cycle is going to stop any time soon.

We still have to be prepared for several months with falling prices or at least flat rates.

But we also know from history that sentiment towards cryptos can suddenly change.

In any situation, it is important to keep your composure.

Contrary to popular belief, investors often experience their biggest losses in the last third of a bear market.