In order to become a successful investor, you must know the terms of the financial market, and " Bear Market " is one of the most important terms. In this article, we will explain what is Bear Market, what are the main factors that cause it and how you can invest smartly in such periods so as not to lose money.
If you want to take advantage of the price drops to buy bitcoin, the cryptocurrency spare platform is the ideal solution. Why choose Abarai ?
- You can buy or sell cryptocurrency quickly and simply, using any payment method you want.
- There is no need to open your account or register. To perform a transaction you just have to provide billing data.
- The Abarai platform is a non-customs exchange. You are the only one who has control over your cryptocurrencies.
What is Bear Market?
In general, it is considered that a market enters "Bear Market" when a decrease of 20% or more than recent peaks is registered. What defines a Bear Market is the negative feeling of investors, often associated with a weak economy, reduced confidence and massive sales of assets to minimize losses.
While the term "Bear Market" refers mostly to the decreases of shares markets, other financial instruments can enter this category if they decrease by over 20% for a period of at least two months.
Characteristics of a "bear market":
- Prices drop: The prices of financial assets are declining.
- Investors' pessimism: investors tend to be pessimistic and have a negative perspective on the market.
- Increased volatility: the market can be very volatile, with high price fluctuations.
- Declining economy: Often, "Bear Market" are associated with periods of economic recession.
Example: In 2020, during the Covid-19 , the global markets entered a fast bear market, caused by the economic uncertainty and global lockdows.
The trigger factors of a Bear Market
Bear Markets can occur for several reasons, and the causes are often interconnected. Although each Bear Market has its peculiarities, there are some common causes that lead to such periods:
Economic causes
A decline or stagnation economy creates ideal conditions for a Bear Market. Typical signs of a declining economy include:
- High unemployment - the increase in unemployment reduces the power of buying and confidence.
- Low available revenues - if people have fewer funds for consumption, companies report lower sales.
- Poor productivity - a decrease in efficiency can limit economic growth.
- Declining profits - when business does not make sufficient profits, the prices of their actions tend to decrease.
These conditions create a domino effect that affects the entire economic ecosystem.
The speculative bubbles that break
The moments of exuberance in the markets, when the prices of certain assets are overvalued, can lead to speculative bubbles. Notable examples include Bula Dot-Com from the 2000s and the global real estate crisis since 2008. When the bubbles are breaking, a steep decrease of prices follows and the premises favorable to the appearance of a Bear Market are created.
Pandemias and world crises
Recent examples, such as Covid-19 pandemic, show how global sanitary challenges can suddenly affect consumers and investors. Immediate reactions have materialized in massive sales of assets and economic losses, resulting in a "bear market".
Wars and geopolitical seizures
International conflicts and geopolitical tensions increase global uncertainty. Investors become fearful of risks and prefer to withdraw their investments, which leads to market decline.
Major changes in the economy
Drastic changes, such as the transition to a digital economy, can temporarily destabilize markets. Such paradigms create insecurity and can trigger Bear Markets.
Government interventions
Changes in tax or monetary policies can affect the feeling of markets. For example:
- Tax increase can discourage investments.
- Increasing interest rates reduces access to companies to capital and can discourage loans.
Loss of investor confidence
The market is based on trust. If investors perceive that a crisis follows, they can start selling massively. This defensive behavior creates a vicious circle and can result in the creation of a "bear" market.
The consequences of a Bear Market: A detailed analysis
The consequences of a "Bear Market" are widely felt, affecting both the individual portfolios of investors and the general economic stability.
While for some investors a Bear Market can be an opportunity to buy at low prices, for others it is a period of great financial losses.
- For companies, it is a difficult time to attract capital.
- For economy, consumption decreases, and recessions become more likely.
- For investors, the fear of loss can cause defensive strategies that remove them from long -term opportunities.
How can we identify the signs of an imminent bear market
Here are some early signals that may indicate that a Bear Market follows:
- Pessimistic economic statements from governments or financial organizations.
- A steep decrease in shares of shares accompanied by large trading volumes.
- Massive reductions in the earnings of companies.
- Rapid increases in interest rates.
Investors must pay attention to these signals and adapt their strategies according to the context. Once these signals are identified, it is important to understand that a "bear market" is held in four distinct phases, each with its own characteristics.
The phases of a bear market
A Bear Market goes through four distinct phases. Knowing them can help you anticipate market movements:
First phase: Optimism and high prices
In the first phase of a Bear Market, the prices of the shares are high, and the investors are optimistic. This is the period when the market seems stable, and many investors continue to buy shares. However, towards the end of this phase, clear signs of change highlighted begin to appear by the fact that investors begin to sell their assets, which leads to a first drop in prices.
How can this phase be seen?
- Trading volumes remain constant or even grow.
- Prices are close to historical maximums.
- A slight concern begins to occur among more cautious investors because the volume of sales in the market increases.
Second phase: panic and avalanche of sales
The second phase is marked by rapid price drops. Economic indicators begin to decrease, the confidence of investors as well. This is the moment when pessimism takes over the market, and many investors panic, hurrying to sell their actions to minimize losses. This is known as the capitulation .
What happens in this phase?
- Steep decreases in the value of shares.
- Trading volumes increase significantly due to massive sales.
- The profits of companies begin to decrease, affecting the market negatively.
Third phase: They make their speculators appear
In the third phase, speculators begin to return to the market. They take advantage of the low shares of shares, hoping in a price recovery, which leads to a temporary increase in volumes and prices, but this is rarely sustained in the long term.
In this phase we can see that:
- Small short -term price increases appear.
- Long -term investors remain skeptical.
- The volume of transactions is unpredictable.
Last Phase: Stabilization and transition to Bull Market
The last phase is characterized by slower decreases in prices. As positive economic news appears, investors' confidence is gradually restored. More and more investors are back on the market and it begins to be more stable. Thus, the transition to a new Bull Market takes place.
How do we know this is the final phase?
- Prices reach minimal levels, but they begin to stabilize.
- Economic news and financial results become more encouraging.
- Investors begin to observe opportunities and enter the market again.M
When does the market decrease: bear market or correction?
What are the market corrections
Market corrections are temporary decreases in the prices of financial assets, usually between 10% and 20% compared to the latest peak. Unlike Bear Markets, they are considered a normal part of the market cycle and are regarded as opportunities to buy assets at lower prices.
Characteristics of corrections:
- Limited duration : Corrections usually take several weeks to two months.
- Quick Recovery : Markets tend to return quickly to previous levels.
- Moderate decline : the price drop is about 10-20%.
Key differences between Bear Market and Corrections
1. Duration
Correction : Usually, it takes a few weeks or maximum two months. Price recovery is fast.
Bear Market : It can take between a few months and a few years, which makes recovery slower.
2. The extent of the decrease
Correction : Moderate decrease of about 10-20%.
Bear Market : Higher losses, over 20%, seriously affecting investors' confidence.
In both situations, it is essential to maintain your long-term perspective and not make emotional decisions based on fear or hope.
Last Bear Market significant on Crypto market
The last Bear Market on Crypto market took place between 2021-2023. This period was marked by a significant decrease in the prices of most cryptocurrencies, including Bitcoin and Ethereum .
Here are some key aspects:
The appearance of the first signs of Bear Market:
- Although Bear Market reached the climax in 2022-2023, the signs of weakness have appeared since April 2021.
- At that time, Bitcoin reached historical maxims, followed by significant corrections.
- This volatility created a climate of uncertainty, which contributed to the subsequent decline.
Factors that contributed to decline:
- Starting with 2021, there have been concerns about the regulation of cryptocurrencies, especially in China.
- The events of 2022, such as the Terra (Moon) and FTX collapse, intensified the panic and led to a drastic price drop.
- Increased interest rates and global inflation have even more accentuated decline.
Summit Crypto in the USA: Is the cryptocurrency market collapse?
Investors expect the Crypto summit at the White House of March 7, 2025 to trigger massive sales, a common phenomenon known as "buying the rumor, selling the news". Could a collapse of the cryptocurrency market follow?
The context of the summit and the decisions of the Trump administration
The Crypto summit at the White House comes shortly after an executive order by Donald Trump, which was created " Strategic Bitcoin Reserve " (Bitcoin Strategic Reserve). The order also includes the creation of a "Digital Asset Stockpile", which manages other cryptocurrencies such as Solana, Ripple and Cardano.
The meeting aimed to strengthen the existing regulations and stimulate the collaboration between the Crypto industry and the US government.
Key participants in Summit
The event enjoyed the presence of prominent figures:
- Brad Garlinghouse (Ripple): known for promoting XRP and innovation in international payments.
- Michael Saylor (Strategy): Active promoter of Bitcoin as a valuable reserve.
- JP Richardson (Exodus): dedicated to simplifying access to assets crypto through its platform.
- Brian Armstrong (Coinbase): the leader of one of the most popular crypto trading platforms in the world.
Crypto summit at the White House, short
- The Crypto summit at the White House, led by President Trump, ended without the expected bold announcements, which led to a decrease in altcoins such as XRP, ADA (CARDANO) and SOL (SOLANA).
- Instead of revolutionary measures, the summit led to the outline of a legislative framework for Stablecoins, with a deadline in August, and promises regarding a lighter regulation. These decisions failed to boost the market as it was anticipated.
- Although the market reaction was negative, the US Government's decision to keep the Bitcoin holders could influence other states to adopt a similar approach, thus contributing to the increase of the global cryptocurrency adoption.
In conclusion, the long -awaited summit on Friday ended without major surprises for investors in cryptocurrencies, but there are fears that the cryptocurrency market could know a decline.
A common concept on financial markets, "buying the rumor, selling the news" describes the tendency of investors to buy in anticipation of an event and to sell immediately after its completion.
Previous examples:
- Increasing cryptocurrency prices after Trump's choice as president, followed by rapid decreases in the inauguration.
- Ethereum grew before the ETFs approval of September, but lost the earnings immediately after.
What direction will Crypto market take after the White House Summit?
After the Summit at the White House, investors should carefully analyze the future risks and be cautious because the lack of major ads or the market tendency to react to overvaluation can lead to decreases.
We recommend investors to:
- Carefully monitor the evolution of the market after the summit.
- It is constantly informed to make decisions based on concrete data.
If you want to know more about cryptocurrencies, you will find a number of resources with valuable information on the Abarai blog . We recommend that you read:
