A bear market is a prolonged period of declining prices in a market. Bear markets are generally caused by weakening economic conditions, uncertainty about the future or bad news that shakes investor confidence. Typically, when prices fall more than 20% from recent highs over a period of 2 months or more, we can then speak about a bear market. A bear market could also accompany general economic downturns such as a recession. A bear market can be cyclical (several weeks/months) or longer-term (several years).
The causes of a bear market are multiple and varied but usually, a weak economy, bursting market bubbles, pandemic, wars and geopolitical crisis are all factors that might cause a bear market.
Cryptocurrencies are particularly susceptible to extreme price swings in response to news events because they are traded on unregulated exchanges around the world. In general, when a bearish trend takes hold in the crypto market, prices fall and volatility increases. This can lead to panic selling by investors who fear they will lose money if they don’t sell now. As the market falls, more investors sell and the cycle continues until buyers reappear at lower prices.
Bear markets are contrasted with upward trending bull markets.
A bull market is a period of time when prices in a market are increasing and investor confidence is high. The term is most often used to describe the stock market, but it can be applied to any type of investment. Bull markets typically last for months or even years, and during that time investors can make a lot of money if they buy cryptos, stocks or other assets at the right time.
Bull markets are typically driven by optimism, investor confidence and expectations of higher profits over an extended period of time. No investor can predict when the trend might change because part of this difficulty lies in the psychological effects and speculation that play a huge role in the markets.
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