Technically, a crypto bear market is characterized as a period of more than -20 from its all-time high which lasts for over sixty days. In the crypto space, a bear market is a period in which the price of a crypto will remain stagnant for a duration of time, typically three months or more.
In terms of Bitcoin and other top-tier coins, it’s ten times cheaper when going through such phases. It would be worth mentioning that while it is certain to experience its ups and downs, the bear market lasts approximately four times longer than a bull market.
But did you know that there are a couple of stages in a bear market? Here you go:
First stage – Sell-off
An initial sell-off is one that occurs after a bull rally and often does not last long. Coinbase/Coinbase Pro, CME trading platforms, etc. all indicated that Bitcoin price is likely headed for a quick drop to $6,500, but then reversed and continued to rise.
Second stage – The reversion bounce
After the first stage, we have a reversion bounce. Typically, this phase happens one to three weeks after the initial sell-off and it is a small price increase. This phase can last between zero and six hours. For example, the price of Bitcoin dropped by $870 billion in just 24 hours on February 5, 2018, before rebounding to $11,500 within that day.
That said, once Bitcoin recovers, it will start the next leg of the bear market.
Third stage – The Capitulation and a Final Drop
The third stage is called the capitulation. It is the period of price drops that last from a few days to over a year. For example, the price of Bitcoin dropped from $20,000 to $10,000 in just one month at the peak of late 2017.
More importantly, when the price of Bitcoin starts to fall after it hits its peak, that is the capitulation. You can tell this stage when you see it because the price will drop in a very short period of time, e.g. over a day or even an hour or two.
As such, due to the extreme volatility and price movement, it is nearly impossible for investors to know when this phase will occur. It is known that the third stage can only happen once which means that there can never be another capitulation after it happens.
Wrap Up
Bear market is unpredictable, but it is essential for long-term investors as well as for traders to know its stages in order to maximize their gains and minimize losses.
