A bear market is defined as a prolonged period of time where there is a significant decline in the crypto or stock market. This can be caused by a recession, high unemployment rates, political instability or a combination of any or all of these things. To be prepared for a bear market, it's important to know the key terms traders and investors use to discuss it.
Bear Market Glossary
- Accumulation phase: This is a period of consolidation where prices are trading within a narrow range, usually following a bear market or a downtrend in prices and investors see an opportunity to buy or accumulate assets at a low price. The significance of an accumulation is that it usually precedes a start of an uptrend in prices or a bull market.
- Altcoin: An altcoin is any cryptocurrency that is created as an alternative to bitcoin. Altcoins may be created to improve upon the original design of the Bitcoin network or to pursue an entirely different model.
- Bagholder: A bagholder is someone who holds a coin that has lost value and is now worth less than what he paid for it, or nothing at all. Bagholders typically buy toward the peak of a crypto’s value and end up holding nothing but an empty bag.
- Bearish: A bearish market is one where prices are falling.
- Bullish: A bullish market is one where prices are rising.
- Bear market: A bear market is a prolonged period of decline in the prices of assets. Bear markets are typically associated with a high level of market uncertainty and pessimism.
- Bearish flag: This is a technical pattern found on a chart that looks like an upside-down flag with a pole. After a period of bearish price action, this pattern signifies a potential additional bearish price drop.
- Bubble: A hyper increase of price fueled by speculation and hype for a certain market or asset. It is often associated with all the assets within the market being overvalued and anticipation that the price could crash or the bubble will burst.
- Bull market: A bull market is a prolonged period of growth in the prices of assets. Bull markets are typically associated with high market optimism and confidence.
- Bullish reversal: After a period of price decrease or a period of consolidation either below the 50-day moving average or the 200-day moving average, this becomes a start of a new bullish trend.
- Capitulation: This occurs during a downtrend or a bear market where the price of an asset is falling and the asset encounters a massive surge of selling pressure.
- Correction: A correction is when the price of the crypto market or a digital asset drops 10% or more from its peak over a period of days, weeks or months.
- Crypto crash: A crash is a sudden and sharp decline in the prices of assets, usually 10% or more within a day. Crypto crashes are typically associated with high market uncertainty and fear.
- Dead cat bounce: A dead cat bounce is a small and temporary price rebound after a significant decline.
- Death cross: A technical pattern found on charts where the 50-day moving average crosses below the 200-day moving average signifying a potential continuation of a bearish trend.
- Diamond hands: A slang term popular on Reddit and Twitter for those who hold on to volatile stocks or crypto despite high volatility or falling prices, because they believe in the long-term value of the asset.
- FOMO: FOMO is an acronym for “fear of missing out.” FOMO is the feeling of anxiety or excitement that comes from thinking you might miss out on a good opportunity and feeling pressure to get in on it. This can lead to buying a digital asset at its peak price before a massive drop.
- FUD: Fear, uncertainty and doubt. FUD is often used to describe negative sentiment in the market.
- Golden cross: A technical pattern found on charts where the 50-day moving average crosses above the 200-day moving average, signifying a potential continuation of a bullish trend.
- Liquidation: When a business decides to cease operations, it sells its assets to pay off lenders and creditors. Investors can also liquidate their holdings to raise cash, exit a weak position or for other reasons.
- Liquidity: The ease with which a cryptocurrency can be swapped with another digital asset or fiat currency. Assets with good liquidity have a good volume of buyers and sellers.
- Margin call: This occurs when the portfolio value of the owner’s account falls below the required threshold of the broker’s required limit. This would force you to add more money into your account by either depositing more or selling current assets.
- Market capitalization: In crypto, the market cap is the total value of all the coins or tokens circulating in the market.
- Moving average: One of the most common technical indicators found on a chart is a line signifying the average change of price over a specific time frame such as daily, four hours, weekly, etc. It allows investors to see the general trend by smoothing out the spikes and dips in prices. Common moving averages are the 50-day moving average and the 200-day moving average.
- Oversold: This term is used to indicate the price of an asset as being too low or undervalued as shown by a technical indicator such as the relative strength index (RSI) or stochastics, signifying a potential bullish reversal in price.
- Pump and dump: This is a type of market manipulation where a group of investors artificially inflate the price of an asset by buying it in large quantities or hyping it through social media, or both, and then “dumps” it on the market for a profit.
- Rising wedge: This is a technical pattern found on a chart that signifies a potential bearish breakdown in price action. This is usually used in combination with technical indicators such as RSI or money flow indicator (MFI) to measure the likelihood of rapid price decrease in terms of overbought state or bearish divergence.
- Risk on/risk off: The risk-on risk-off theory states when the market or economy is in good shape, investors are more prone to buying riskier investments such as crypto or stocks. When the market or economy is bad, investors prefer safe-haven assets such as bonds or staying with cash on the sidelines.
- Sell-off: Just like it sounds, this happens when people are rapidly selling a specific asset, causing the price to drop quickly with high volume. It can happen during a crash or because of bad economic news.
- Short selling: Short selling is a type of trading where you sell an asset you don't own and hope to repurchase it later at a lower price so that you can profit from the price difference.
- Trade: A trade is a transaction in which you exchange one asset for another. A trade's purpose is to profit from the price difference between the two assets.
- V-shape recovery: This is a technical chart pattern in which prices of an asset or market dramatically plunge only to rebound very quickly, creating a V pattern on a chart.
- Volatility: Volatility is a measure of how much the price of an asset fluctuates. A volatile asset is one that has significant and sudden price swings.
- Whale: A whale is an investor with a large amount of capital. Whales can have a significant impact on the market price of an asset by buying or selling large quantities.
- Whipsaw: When the market is neither bullish nor bearish, there are periods where the price of the market or asset is trapped in a range where the price goes up and down quickly for a prolonged period of time.
- Yield or percent return is how much income is generated from the principal amount of your investment. Let’s say you bought one bitcoin at $10,000, and its current price is $19,000. The yield is 90%.
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