How came the term “Bear Market”

In professional circles, “bears” are traders who play short, that is, take a “short” position in the market. This term is contrasted with another term – “bulls”. Both “nicknames” are not given forever, but for a certain period or within one order, as by the next order the trader can use another instrument and turn from a “bear” into a “bull” or vice versa.

Why such a comparison? It is all about the way these animals attack: a bear piles on his victim, pushing him down, while a bull, on the contrary, lifts his opponent on the horns, i.e., up. Traders who play on the upside, buying stocks, increase the demand for them, thus stimulating the growth of the price. And those who play down, put the stock up for sale, thereby creating additional supply and contributing to the decline in price.

Why it is important

If you are interested in the crypto-currency industry, you might wonder about the factors that determine investors’ and traders’ profits. They are bull and bear markets for sure. Successful hitting a bullish trend can increase your starting capital several times in a few months, and an unsuccessful entry at the beginning of a bearish trend means noticeable losses. In this article, we will give you an answer about what a bear market is and tell you about all its features you should know. First of all, you should know that bull and bear markets have a huge impact on investors and behavior as crypto-currency can be quite an unpredictable asset.

Interconnectedness

Moreover, as a rule, the general tendency of the whole crypto-currency market follows the price of bitcoin since it is the first and the most successful asset in the crypto market. Trends are especially important for the crypto-currency market, which is exposed to global events that can fundamentally change the situation. 

New technological solutions, variants of legislative regulation, attempts to implement blockchain in various spheres of human life appear every day in the crypto industry. That’s why bear trend and the bearish market is an essential factor in trading crypto-currencies.

Bear market

Further, a bear market is a state of the market when the price rates of most currencies go down. Most traders are set to sell currencies in order to fix profits.  When the flow of people willing to invest in digital assets decreases, the inflow of new money and the growth of the exchange rate ends as a result. After that, the process of crypto-currency correction on the market takes place. Important to note, that it is a natural phenomenon in any financial market. 

Those traders who bought crypto at the beginning of a bullish trend then sell off their assets, wanting to make a profit in dollars or other fiat currency, the mass sell-off pushes the price rates down in that way. Nowadays, crypto-currency fallings are common and natural for the market. They should not be the reason for panic for long-term investors as it is a natural process. If you want to read more about the bull market, follow the link to our educational article.

For example, after the increase in bitcoin in 2017, the following year prices started experiencing a decline. This was however because of the remarks made by some investors who were unable to make a profit after trading. Consequently, the price of Bitcoin dropped from sixteen thousand euros in 2017 to about three thousand euros in 2018. 

The 20% figure is quite subjective, and downward trends are sometimes not so easy to spot.  As a result, analysts usually use a variety of tools and helping tools to spot unclear bearish trends. Moreover, a bear market is often associated with a slowdown in economic development, high unemployment, low income, low commercial profits, and insufficient productivity. Additional factors include the tightening of crypto-regulation, problems with some projects, hacking of leading exchange platforms. Use a well-protected bit4you platform to minimize your risks.

How to use it on bit4you