Definition
A bear market is a market condition where prices of assets, such as cryptocurrencies, decline over an extended period and stay at depressed levels. It is generally associated with widespread pessimism, reduced trading activity, and lower willingness from buyers to pay higher prices. In crypto markets, a bear market often follows a strong price run-up and can lead to sharp corrections across many coins and tokens.
Bear markets are closely tied to negative market sentiment, where many participants expect further price drops rather than recovery. This environment can increase the risk of liquidation in leveraged positions, especially in instruments like futures that amplify gains and losses. Bear markets contrast with bull markets, which are characterized by rising prices and more optimistic expectations.
Context and Usage
In trading discussions, the term bear market is used to describe not just falling prices but an overall climate of caution and fear. It often coincides with higher volatility, as rapid price swings occur while the general direction remains downward. Traders and analysts may label a period as a bear market when major assets have dropped substantially from previous highs and stay weak for weeks or months.
Within crypto, a bear market can affect everything from trading volumes to the launch of new projects, as lower prices and negative sentiment reduce risk-taking. Market participants may refer to being "bearish" when their expectations align with continued declines typical of a bear market. The concept is central to understanding broader market cycles and how they differ from the optimism and growth seen in a bull market.