What is a bear market?
Bear markets are defined as a period of time where supply is greater than demand, confidence is low, and prices are falling. Pessimistic investors who believe prices will continue to fall are, therefore, referred to as “bears.” Bear markets can be difficult to trade in — particularly for inexperienced traders.
It’s notoriously difficult to predict when the bear market might end and when the bottom price has been reached — as rebounding is usually a slow and unpredictable process that can be influenced by many external factors such as economic growth, investor psychology, and world news or events.
But they also can present opportunities. After all, if your investment strategy is longer-term, buying during a bear market can pay off when the cycle reverses itself. Investors with shorter-term strategies can also be on the lookout for temporary price spikes or corrections. And for more advanced investors, there are strategies like short selling, which is a way of betting that an asset will decline in price. Another strategy many crypto investors employ is dollar-cost averaging, in which you’d invest a set amount of money (say $50) every week or month, whether the asset is rising or falling. This distributes your risk and allows you to invest through bull and bear markets alike.
