A bear market is an integral element of any financial market, and the cryptocurrency industry is no exception. Let us examine why a bear market emerges, which stages it goes through, and which approaches help investors survive a prolonged decline in cryptocurrency prices with minimal losses.
What is called a bear market
A bear market is commonly understood as a prolonged period of sustained decline in asset prices. In cryptocurrencies, such phases often stretch over years. One illustrative example is the downturn in the digital asset market from November 2021 to October 2023.
This stage is also referred to as a bear trend. Its key characteristic is not a local correction, but a systemic decline that affects even the largest cryptocurrencies by market capitalization. As a rule, cryptocurrency price declines exceed 20% and are accompanied by a deterioration in fundamental indicators.
The term “bear market” originated back in the 18th century, long before the emergence of cryptocurrencies. It comes from stock market trading. The most widespread version of the term’s origin is associated with the behavior of selling traders, who were called “bears.”
The image of the bear symbolizes downward pressure on price: in nature, the animal attacks its prey from top to bottom, much like sellers “press” the market, provoking a decline in quotes.
Main phases of a bear market
It is customary to distinguish four key stages in the development of a bear market.
1. Optimistic phase
The initial stage of a bear market is accompanied either by peak hype or by a state of strong oversold conditions*. Gradually, buyer interest weakens, and the market loses its upward momentum.
* Oversold conditions refer to a situation in which assets are sold en masse, and their price falls significantly below levels justified by fundamental or technical factors.
2. Active decline phase
When selling pressure begins to dominate, the bear market moves into the second stage. Buyers are no longer able to support prices, and cryptocurrency quotes fall rapidly.
This process is influenced by both internal and external factors:
Macroeconomic factors: changes in US Federal Reserve policy, the condition of stock markets, recessions, election outcomes, as well as fiscal and trade decisions.
The decline can be intensified not only by selling on the spot market, but also by the opening of short positions in futures markets, where traders profit from falling prices.
A characteristic example is the situation following the update of all-time highs by Bitcoin and Ethereum in November 2021, when the crypto market capitalization exceeded $3 trillion and then, by early 2023, decreased by more than 3.5 times—to below $800 billion.
3. Speculative phase
After a sharp decline, the market enters a stage of unstable fluctuations. During this period, short-term rebounds and local rallies are possible, but the overall trend remains downward.
4. Slowdown and consolidation phase
When prices reach deep oversold levels, the pace of decline slows. The bear market may transition into sideways movement, in which quotes fluctuate within a narrow range.
This stage is often referred to as the “slow decline” phase. Gradually, buyer interest begins to increase, which over time may lead to a transition from a bear market to a bull market. A similar shift was observed in early 2023 amid declining inflation in the US and a recovery in stock indices.
How investors can protect themselves in a bear market
Professional market participants use various tools to reduce risks during a bear market. One of these is hedging*.
* Hedging is a risk management method in which an investor opens additional positions or uses derivatives* to offset potential losses on core assets.
* Derivatives are financial instruments whose value directly depends on the price of an underlying asset, such as a cryptocurrency, stock, index, or commodity. In the context of hedging, derivatives are used to protect capital: the investor opens positions that generate profit when the price of the underlying asset moves unfavorably, thereby partially or fully offsetting losses on primary investments.
Another important approach during a bear market is portfolio diversification. Diversification involves investing in various instruments: cryptocurrencies, stocks, bonds, commodities, and other assets. By allocating capital across different asset classes, an investor reduces dependence on the price dynamics of a single asset.
Stop-loss orders are also widely used in trading—predefined price levels at which a trading position is automatically closed. This tool allows an investor to determine the maximum acceptable loss in advance, disciplines trading behavior, and reduces the emotional impact on decision-making. The use of stop-losses is especially important in a bear market, when sharp and impulsive price movements can lead to significant losses over a short period of time.
Is the crypto market in a bear phase at the end of 2025?
Some analysts believe that cryptocurrencies have already entered a bear market. As evidence, they cite the Bull Score index from CryptoQuant, which fell to zero for the first time since 2022. An additional signal is the reduction in bitcoin purchase volumes by Strategy—the largest public holder of BTC.
This view is shared by Ledn’s Chief Investment Officer John Glover. According to his assessment, the bear market may last at least until the end of 2026, and the price of bitcoin could fall to $70,000. The analyst believes that the beginning of the bear market coincided with BTC’s drop from its all-time high of $126,000 to the $104,000 level.
At the same time, an alternative opinion exists. Some experts believe that the current situation represents only a local correction. For example, Donald Trump’s bitcoin adviser David Bailey believes that due to high institutional demand, a full-fledged bear market may begin only in a few years.
A similar position is held by Ryan McMillin, co-founder of Merkle Tree Capital. According to his base scenario, the peak of the current crypto cycle will occur in mid-2026, and the bear market phase will begin only after maximum levels are reached.