What is a Bear Market?

May 23, 2025 | 3 min read

Explaining a Bear Market

You've probably heard the term bear market, especially if you invest in crypto or stocks. But what does it really mean to be in a bear market? And how can you spot a bear run before it’s too late? In this article, we dive into the world of declining markets, pessimistic sentiment, and smart strategies.

Key Takeaways

A bear market is an extended period where the prices of assets like stocks or crypto continue to fall.
Bear markets are often caused by pessimism and uncertainty.
The term comes from the downward attack of a bear and symbolizes a falling market.
Fear, FUD, and panic selling accelerate the decline and are often disconnected from fundamental values.

What Does a Bear Market Mean?

A bear market is a period in which the value of an asset, such as stocks or cryptocurrencies, continues to decline over a longer period. Usually, we speak of a bear market when prices have dropped by 20% or more compared to a previous peak. This often comes with fear, uncertainty, and investor caution.

Where a bull market is characterized by optimism and energy, a bear run is marked by uncertainty and caution. Investors fear a further drop in individual stocks and are hesitant to invest new money. This creates a negative spiral that pushes the market even lower. Technical analysis during these times also tends to look negative, which only reinforces the effect.

Why Is It Called a Bear Market?

The term bear market comes from English and refers to the way a bear attacks: with its claws from top to bottom. This symbolizes the falling prices during a bear market. A bear market is the opposite of a bull market. In a bull run, prices rise significantly. It's called a bull run because a bull attacks with its horns from the bottom up, symbolizing an upward trend.

The Psychology of a Bear Market

What many people underestimate is how much influence emotion has on the market. Fear and uncertainty cause massive fluctuations. During a bear market, you often see the following:

FUD (Fear, Uncertainty, Doubt) spreads quickly.
Investors sell in panic to avoid further losses.
New investors are afraid to enter the market.
Media coverage is negative and focuses on bad news.

All of this reinforces the decline. Many of these movements are not based on fundamental value, but on emotion and herd behavior.

How to Recognize a Bear Market?

You can usually recognize a bear market by:

Prolonged price declines (at least 20%)
Low trading volumes
Negative news and economic uncertainty
Poor performance from major market players (even with strong fundamentals)
Decreased confidence among investors

In the crypto market, this is often accompanied by hype projects collapsing, smaller tokens disappearing, and mainly stronger coins (such as Bitcoin and Ethereum) managing to stay somewhat afloat. That’s why we always recommend having an exit strategy when you start investing.

What Can You Do During a Bear Market?

A bear market often feels like a nightmare for investors, but it also offers opportunities. Here are a few tips:

Stay calm. Emotional decisions often lead to mistakes.
Reevaluate your strategy. Think long-term instead of chasing short-term gains.
Invest in quality. Large projects with a strong foundation usually survive.
Use dollar-cost averaging (DCA). DCA is a popular investment plan. By investing small amounts regularly, you lower your average entry price.
Learn from the market. Bear markets are the perfect time to deepen your knowledge.

Examples of Bear Markets

The dotcom crash (2000-2002): After a period of extreme growth in tech stocks, the Nasdaq fell by more than 75%.
Financial crisis (2008): Global stock markets plummeted, and investors lost faith in banks and financial institutions.
Crypto winter (2018): Bitcoin dropped from nearly $20,000 to around $3,000. The altcoin market lost over 90% of its value.
Bear market in crypto (2022): After the 2021 bull run, the entire crypto market dropped by over 60%. Major players like Terra (LUNA) and FTX collapsed, further undermining trust.

Is a Bear Market the End?

Absolutely not. Every bear market is part of the natural market cycle. Declines are followed by stabilization and eventually new growth. Historically, markets often recover, although it can take months or even years. For patient investors with a clear strategy, these are the moments when the foundation for future profits is laid.

Final thoughts

A bear market, also referred to as a bear market, bear run, or bear phase, is a period of prolonged price declines and negative sentiment. It is a challenging phase where panic and uncertainty often dominate. But those who remain calm, think strategically, and don’t get swept up by fear can find interesting opportunities in a bear market.