Bear Market

While there is no definitive threshold that determines what counts as a bear market, the consensus in the traditional finance industry is a 20% decline from the market top over 2 months or more.

Because the crypto markets are often more volatile, industry participants have used different criteria to define crypto bear markets. The most common model is the four-year cycle, under which bear markets typically last between 12 and 18 months and Bitcoin dropping over 70% from peak to trough. A few key indicators of a crypto bear market include forced selling by bitcoin miners, drops in bitcoin volatility, a broader decrease in total crypto market cap, and rising stablecoin supply.

Bear markets are distinct from simple price corrections. Crypto corrections are short-term and can result in sudden price dips of 10% to 20% within a bull market. A bear market, however, represents a structural shift in market sentiment, with prolonged negative price action.

Even during bull markets, localized bear markets can also occur within specific sub-sectors of the industry. For example, NFTs might enter a bear market while memecoins and DeFi thrive. Notable historical bear markets include 2018’s “crypto winter” following peak ICO hype, the 2022 blowup of major industry participants like Terra Labs and FTX, and the bear market following the 10/10 crypto crash.