Bear Market

A bear market is a prolonged period of falling prices and pessimistic sentiment, conventionally defined as a decline of 20 percent or more from recent highs — though in crypto, bear markets routinely cut far deeper. The name is said to come from how a bear attacks, swiping its claws downward. Bear markets are the counterpart to bull markets and a recurring feature of crypto's boom-and-bust cycles.

Crypto bear markets are severe by traditional standards. Bitcoin fell roughly 80 percent or more from its peaks in both the 2018 and 2022 downturns, and many altcoins lost over 90 percent, with a large share never recovering at all. The 2022 bear market, for example, combined falling prices with cascading failures — the Terra/Luna collapse, and the bankruptcies of lenders and the FTX exchange — showing how downturns expose leverage and fraud that bull markets conceal. Bear markets can last a year or more, grinding down sentiment long after the initial crash.

A common misconception is that bear markets are simply dead time; historically they have been when serious development continued and when disciplined investors accumulated positions, giving rise to the phrase "bear markets are for building." The practical dangers are distinct from bull-market dangers: catching falling knives (buying too early into a continuing decline), and capitulating — selling at maximum pessimism near the bottom. Sharp rallies of 20 percent or more can occur within ongoing bear markets, so a strong week does not by itself signal the trend has reversed.