Term

Bearish

A market condition characterized by falling prices and pessimistic sentiment.

Type:
investing
Also known as:
Bear Market
Bears
1
investing

A bearish market condition is characterized by falling prices and pessimistic sentiment over a prolonged period. This is often due to widespread selling and a lack of buyer activity. The term "bear" originates from the way a bear attacks – swiping its paws downward – symbolizing the downward movement of prices.

A bear market is typically defined as a period when prices fall 20% or more from recent highs. These market phases can last for months or even years and are marked by several key characteristics:

  • Declining trading volumes and liquidity
  • Increased market volatility
  • Negative investor sentiment
  • Reduced project funding and development activity
  • Risk aversion and flight to safety assets

During a bear market, funding can be scarce and enthusiasm low. Many projects struggle to raise capital, and industry layoffs may occur as companies reduce costs to survive the downturn. Trading volumes typically decrease, and price recovery attempts often fail, creating lower highs and lower lows on price charts.

However, these periods can also present opportunities to work on projects and accumulate assets at lower prices, in preparation for a potential future bull market. Many successful investors use bear markets to:

  • Build long-term positions through dollar-cost averaging
  • Research fundamentally strong projects trading at discounts
  • Develop products away from market hype and FOMO (Fear Of Missing Out)
  • Study market cycles to better prepare for the next bullish phase
Historical Example

The cryptocurrency market experienced a significant bear market from December 2017 to December 2018, when Bitcoin dropped from nearly $20,000 to around $3,200, representing an approximately 84% decline. Many altcoins fell by over 90% during this period.

Market Signals

Common signals of bearish sentiment include increased selling pressure, failure to break resistance levels, declining trading volumes, negative media coverage, and regulatory challenges that impact investor confidence.

2
context

In technical analysis, traders identify bearish patterns such as "head and shoulders," "descending triangles," and "death crosses" to predict potential downward price movements. These patterns, combined with fundamental analysis of market conditions, help traders position themselves for bearish trends.

The phrase "bearish on [asset]" indicates a negative outlook on that asset's future price performance. Conversely, even in broadly bearish markets, participants can be "bullish" on specific assets they believe will outperform.

See also: Bullish

All terms and definitions may update as the Cryptionary improves.