Bear market

A bear market is a prolonged stretch where prices fall broadly and stay down. The informal definition is a drop of 20% or more from a recent peak. Crypto goes much further than that: past cycles saw 70% to 90% drawdowns on major assets, and often deeper ones on small tokens. It is about the trend, meaning lower highs, lower lows, and a market that stops rewarding buyers, not about one bad week.

Bear markets tend to feed on themselves. Falling prices trigger liquidations on leveraged positions, which forces selling and pushes prices lower still. Trading volume dries up, buyers demand bigger discounts, and fresh money stops entering. Many people sell into stablecoins rather than leave entirely, so stablecoin balances grow as a share of portfolios. Projects that hold treasuries in their own token or a volatile asset watch those funds shrink in dollar terms, and some have to sell to cover costs.

For small-cap holders the damage is uneven. Large assets usually fall hard and later recover, but many small tokens never come back, because liquidity leaves and the team stops building. With thin liquidity pools, even modest sells cause heavy slippage, and a flat chart may only mean nobody is trading. Bear markets also expose weak designs: tokenomics that relied on constant new buyers, high emissions, or large unlocks stop working once the inflows end.

When you are holding through one, check whether a token's liquidity and volume survive the downturn, whether the team still ships and communicates, and how much supply unlocks soon. Be careful with bottom calls. Rallies of 30% to 50% inside a downtrend are normal, and they trap people who read them as a reversal. Scams often increase in this phase, such as fake recovery tokens or rescue schemes aimed at people trying to win back losses. Size positions so you can sit through a deep drawdown without being forced to sell, because nobody can reliably call the bottom in advance.