What is a bear market?
On the other hand, a bear market is one in which the value of cryptocurrencies has fallen by at least 20% and is continuing to fall. An example includes the famous cryptocurrency crash in December 2017, when investors saw Bitcoin fall from $20,000 to $3,200 over the course of a few days.
A declining bear market is characterized by a dip of 20% or more coming from previous highs. As such, prices are low and dropping continuously. The downward trend likewise affects investors’ outlook and perpetuates a further downward pattern. The term ‘bear’ is believed to have come from a bear’s fighting style — starting high, then attacking with claws downward and all its weight pushing down.
During a bear market, the economy is slow with high unemployment rates. These conditions can arise from poor economic policies, geopolitical crises, burst market bubbles and even natural disasters.
Bear markets also lack the general optimism and confidence that most investors have during bull runs.
Typically, crypto traders aim to purchase assets during a bear market, especially during rock bottom. However, it can be hard to know exactly when a bear market has ended, making it hard for investors to take the gamble and purchase low-value crypto that may or may not recover.
Prices typically drop the moment the market receives news concerning unfavorable conditions regarding a particular cryptocurrency or stock. The downward spiral causes more people to hold off on investments due to the belief that more bad news will come soon and that there’s a need to brace themselves for the worst.
Some even sell their holdings out of panic, further creating a downward trend. Bear markets tend to calm down eventually, and investors slowly gain confidence, starting a new bull cycle yet again.