What is a bear market?

What is a bear market?

“Bulls” and “bears” in the market

  • “Bulls” are called investors who play to increase prices at a certain point in time. They believe that the asset will rise in price now and in the future, which encourages them to try to earn from the growth.
  • “Bears” — investors who, unlike “bulls,” are convinced that the price of an asset should fall. On this basis, they open positions to sell (short positions). When prices move down, this brings them the expected profit.
  • The market grows when there are more buyers (“bulls”). Such a market is called a bull market.
  • When the number of sellers (“bears”) prevails in the market, it falls and is called “bearish.”

Phases of a bear market

  • Optimism
    This phase precedes a clear market transition to bearish. At this point, investors are actively buying, or the market is expensive and growing. However, over time, interest in the rising asset fades. Market participants lock in their profits by selling previously purchased coins. Growth slows and comes to a complete halt, indicating the end of the phase.
  • The fall
    Sellers in the market gain an overwhelming advantage and exert a noticeable downward pressure on assets. In addition, economic indicators that are not very good for the issuer, the industry, the country, or the world as a whole can also contribute to the decline.
  • Speculative phase
    At this point, investors can fill the market with a lot of money. However, transactions at this time are usually open for only a short time. Accordingly, the asset price may rise, but not for a long time. Despite short-term corrections, the general trend remains downward (“bearish”).
  • Fall slowdown
    The market has been declining for a long time, and the price may be in the oversold zone. Investors see this and start buying assets on positive news. Thus, “bearish” sentiment is gradually offset by “bullish” sentiment, slowing the price decline.
  • Slow fall
    Investors believe that the asset becomes extremely cheap, making further selling unprofitable. This leads to a reduction in the number and volume of short positions. On important positive news, market participants switch to buying. The decline slows as much as possible; prices enter a sideways movement, most likely replaced by an upward trend.
  • As a rule, any negative news related to assets triggers a panic attack among investors. It spreads almost instantly, forcing holders to divest themselves as quickly as possible of assets in danger of losing profitability or even going into negative territory. For this reason, significant price losses occur in a very short period.
  • On the other hand, a positive value cannot immediately change the mood of potential buyers. For the prices of digital assets to rise, the crypto project must perform enormously, proving stability, building a good reputation, and presenting results that interest investors. Only then will demand on the particular asset increase and trigger further purchases. All of this leads to a smooth and leisurely price increase in times of the bull market.

Bear market vs. Correction

How long do bear markets last?

  1. Use dollar-cost averaging strategy

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