When the price of stocks or cryptocurrencies drops by 20% or more and the slide continues for at least two months, it is considered to be in a bear market. If there's one thing to know about bear markets as a new investor, it's that they 're normal. In this article we will talk about 4 Phases of a Bear Market, and how long does a bear market last?
The Causes of a Bear Market
A bear market often strikes before or after the economy's recession. Investors closely monitor critical indicators such as hiring, wage growth, inflation, and interest rates to assess the economy's health. In the COVID-19 pandemic, several symptoms were slightly different, and numerous economic restrictions due to closures, unemployment claims, and social distancing measures indicated the economy was in danger.
When investors see an economy declining, they predict a sharp decline in firm profits. Consequently, they sell their equities, resulting in decreased prices and lower markets. A bear market might foretell more unemployment and more challenging economic circumstances in the future.
4 Phases of a Bear Market
Bear markets typically consist of four distinct stages:
- High prices characterize the first phase. After this period, investors begin to exit the markets and collect gains.
- In the second phase, asset prices and trading activity decline, the company decline, and previously optimistic economic indicators deteriorate. As the mood begins to deteriorate, some investors experience fear, a condition known as capitulation.
- The third phase is when speculators join the market, increasing prices and trade volume.
- Crypto continued to fall in the fourth and final phase, albeit slower. As lower prices and optimistic news re-attract investors, bear markets eventually transition into bull markets.
How long does a bear market last?
Bear markets tend to be short-lived. The average length of a bear market is 289 days, or about 9.6 months. That's significantly shorter than the average length of a bull market, which is 991 days or 2.7 years.
Now, I hope you get a better understanding of bear market, by reading this article
