When does the market fall? A guide to the bear market for every trader

What is a bear market and why every trader should know it

A bear market is a prolonged period of decline in financial markets – a situation that every investor would like to avoid. In practice, however, it is a normal element of every market cycle. Simply put: markets rise gradually, but sometimes fall like an elevator. When prices begin to sink, often for long months or years, we are indeed dealing with a bear market.

A bear market usually lasts for several months, but sometimes it can drag on for years, and is characterized by a mass withdrawal of investors from the market. It is a more serious phenomenon than a regular correction – it signals deep problems in the economy or market trust.

Why is a bear market the reality of every market?

History shows that Bitcoin has moved in a long-term upward trend throughout its existence. But along the way, it has experienced several episodes of brutal declines – sometimes losing 80%, while altcoins have weakened by as much as 90%. If you think this is a rarity, you are mistaken. It's a normal part of the game.

The phenomenon of a bear market is often associated with economic problems: recession, rising unemployment, falling corporate profits. At that time, investors look for an exit from the stock market, which causes a domino effect – sellers rush for the exits, attracting more sellers. If there is a lot of leverage in the market, the effect can be even more dramatic. High volatility and panic are a recipe for cascading liquidations.

What usually triggers bear markets?

The reasons can vary, and sometimes they occur simultaneously:

Slowdowns and recessions – when the economy slows down, companies earn less, investors sell stocks and cryptoassets.

Geopolitical crises – wars, trade tensions, or other conflicts drive investors towards safe assets (bonds, cash, stablecoins)

Exaggerated price increases – unjustified valuations ( like the dot-com bubble in the year 2000 ) eventually burst.

Changes in monetary policy – the increase in interest rates ( as in 2022) raises the cost of loans and shakes sentiment.

Unexpected shocks – the pandemic in 2020 or the financial crisis in 2008 prove that the market likes to surprise.

Bear and Bull – what's the difference?

In a bear market, prices fall, while in a bull market, they rise. But there is one more important difference – during a bear market, long periods of consolidation occur, which means trading in a sideways trend. The market stagnates, volatility decreases, and activity declines. This is logical – no one wants to trade in a declining market. In a bull market, such stagnation occurs less frequently.

History shows: bitcoin has survived it all

Bitcoin is one of the best assets in the history of financial markets. But even it has gone through terrifying bear markets:

2018-2019: After rising to 20 thousand USD in December 2017, BTC lost more than 84% of its value in the following months.

2019-2020: Another drop of over 70%, with the pandemic in the first quarter of 2020 crushing BTC below 5,000 USD.

2022: From a low below 4,000 USD in 2020, bitcoin surged to nearly 69,000 USD in 2021. But then it dropped by over 77% to a level below 15,600 USD in November 2022.

And after all – bitcoin has returned. This is not a coincidence.

How to defend yourself during a bear market? Practical strategies

Reduce risk instead of waiting for a miracle

The simplest option: convert assets to cash or stablecoins. If falling prices make you uneasy, it means you are investing more than you can afford to lose. Position size is everything.

Just wait (HODLowanie)

If you plan to hold investments for years or decades, a bear market is just a number on the screen. History shows that strong-positioned markets, like the S&P 500 or bitcoin, eventually recover losses.

Dollar Averaging (DCA) – secret weapon

Many investors treat a bear market as an opportunity. DCA is buying regularly, regardless of the price. If Bitcoin costs 100 thousand USD and drops to 80 thousand, you buy more – your average price drops to 90 thousand USD. In a bear market, this tactic often pays off.

Short Selling – earning on declines

Experienced traders profit from declines by shorting. You can also use hedging – if you have 2 BTC in your wallet, you open a short position of 2 BTC on derivatives platforms to offset losses from a possible further decline.

Trading Against the Trend – Risky Business

Some traders are waiting for rebounds in the bear market ( known as “dead cat bounces” ) and are entering long positions. This is super risky – a lot of volatility, easy to fall into a trap. Even top traders are losing here, “catching falling knives.”

Where did the word “bear” come from?

“Bear market” is a metaphor – the bear waves its paws downwards, symbolizing falling prices. Meanwhile, the bull thrusts its horns upwards (bull market). The terms have been in use since the 19th century. One theory suggests that “bear” comes from bear skin traders who sold furs before they were obtained – similar to today's short selling.

Summary: bear markets are a reality, not the end of the world

Bears appear due to economic problems, geopolitical conflicts, or speculation – and that’s normal. If you have a plan and discipline, you can survive a bear market and even make a profit. Many investors during such times simply HODL or switch to less risky assets. Others regularly buy through DCA. Experienced speculators short. Regardless of the strategy – preparation and a calm mind are what matters.

History suggests that after every bear market comes a bull market. The only question is whether you will be patient enough to wait for it.

Disclaimer: This content is provided for educational and informational purposes only. It does not constitute financial, investment, or legal advice. Please consult a qualified advisor before making any investment decisions. The prices of digital assets are volatile and can increase or decrease. You bear full responsibility for your investments.