What Is a Bear Market?
A bear market represents a period where the average prices of assets are on a prolonged decline. Traders use the term ‘bear market’ to define a market with a 20% decline or more. As such, prices are low and projected to continue dropping for an extended period of time.
During a bear market, the economy is generally slow, with low employment rates and a pessimistic outlook. These conditions often arise from geopolitical crises, natural disasters, political tensions, and/or poor economic policies.
A bear market can classify as a markdown phase within a market cycle. In this phase, prices of assets drop quickly following any unfavourable news regarding the cryptocurrency industry. This negative feedback loop causes more people to hold off on their purchases, believing that prices will continue to drop in the coming months.
Characteristics of a cryptocurrency bear market:
- Declining prices over a prolonged period of time
- Downtrending price trajectory
- High interest rates
- Weak demand and strong selling pressure
- Low market confidence
- Negative media sentiment