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Bearish & Bear Market

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What Is a Bearish Market?

Regardless if you’re into stocks, commodities, crypto, and the like, there are two types of markets. A bull and bear market often refers to the direction along with the sentiment of a market. It’s a concept everyone should know to help them identify their next moves. A bear market can happen due to many causes and is a common occurrence because markets are cyclical.

Turning Negative

A bear market is often the term used for a market that is going down. Most of its movement is downwards with a few phases of consolidation or upward bounces. You cannot call any downward price action a bear market. It has to be something that has or will likely happen for an extended period.

The stock market first popularized the term bear market, and it is often associated with the S&P 500’s performance. However, in recent years, bear markets can happen in any investment space. Many associate a bear market with at least 20% declines in price. This also depends on how volatile the market is.

Causes of a Bear Market

A bear market occurs depending on several factors. The most noticeable bear markets occur because of drastic changes within the economy or associated markets. The 2008 housing market crash and the COVID-19 pandemic were recent events of note. They caused significant downward movements in the markets.

Another example is the cryptocurrency space, which crashed from new highs at the end of 2017. The downward movement sustained for around two years before bottoming out.

How Do You Approach a Bear Market?

It’s easy to invest in a bull market when everything is going up. While many make wealth in upward movements, fortunes are made during the bear market. Investing in a bear market is all about choosing solid projects that will perform well in the long term. You’ll experience downwards and sideways movements for extended times, but you’ll enter a bull market from the bottom up.