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The concept of a bear market is a commonly used term in financial circles. The bear market, also known as a bearish market, refers to a period when prices in the market decline. It is a risky phase and can pose challenges for inexperienced traders.
Bear markets can lead to significant losses, which often deter investors from returning to the financial markets. The duration of this period is uncertain and it is characterized by an expectation of continued price declines in the medium term. Due to increased selling and falling prices, many investors refrain from placing buy orders. This situation prolongs the negative market conditions.
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What Is A Bear Market?
The terms “bear” and “bull” are used to depict market fluctuations. Bears symbolize downward movements as they swipe their claws from top to bottom during an attack, while bulls represent upward movements as they thrust their horns from bottom to top. These animal figures have become the basis for expressing the direction of market swings.
A bear market arises due to economic stagnation, lack of employment opportunities, prolonged weak sales, and low disposable income. To classify a financial product as being in a these times, the predominant trend must be downward. Furthermore, the demand for products decreases under the influence of a bear market.
A bearish phase occurs when selling rates surpass demand in the market. The beginning of a bearish period is marked by a decline in asset prices ranging from 15% to 20%.
As prices decline in this period, many investors rush to exit the market to protect their profits or avoid long-term risks. They may choose to sell their holdings as an exit strategy. This surge in selling creates a domino effect. In the case of a large-scale cryptocurrency in a bear market, it triggers an intense wave of selling. Consequently, the number of investors engaging in short positions in the market decreases.
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