Course Content
What Is a Bear Market?
Financial markets move in trends. It’s important to understand the differences between these trends to be able to make better investment decisions. How come? Well, different market trends can lead to wildly different market conditions. If you don’t know what the underlying trend is, how are you going to adapt to changing conditions? A market trend is the overall direction that the market is going. In a bear market, prices are generally declining. Bear markets can be a challenging time to trade or invest in, especially for beginners. Most crypto traders and technical analysts agree that Bitcoin has been in a macro bull trend throughout its existence. Even so, there have been several relentless cryptocurrency bear markets. These generally bring more than an 80% decline in the price of Bitcoin, while altcoins can easily experience more than 90% declines. What can you do during these times? In this article, we’ll discuss what a bear market is, how you should prepare for it, and how you may be able to profit in it. If you’d like to read about bull markets first, check out What Is A Bull Market?.
What Is a Bear Market?
About Lesson
The difference is fairly straightforward. In a bull market, prices are going up, while in a bear market, prices fall.
One notable difference may be that bear markets can have long periods of consolidation, i.e., sideways or ranging price action. These are times when market volatility is quite low, and there’s little trading activity happening. While the same may be true in bull markets, this kind of behavior tends to be more prevalent in bear markets. After all, prices going down for an extended period isn’t very attractive for most investors.
Something else to consider is whether it’s possible to enter a short position on an asset in the first place. If there’s no ability to short an asset on margin or using derivatives, traders can only express a bearish view on the market by selling for cash or stablecoins. This can lead to a longer, drawn-out downtrend with little buying interest, resulting in a slow and uneventful sideways price action.