Bear Market

A bear market is a sustained decline in asset prices, conventionally defined as a fall of 20 percent or more from a recent peak, accompanied by pessimism and shrinking participation. The name comes from the way a bear attacks, swiping downward.

Why it matters

Bear markets are where investment plans are actually tested. Losses compound psychologically: investors who buy risk near highs routinely sell it near lows, converting temporary declines into permanent ones. The arithmetic of recovery is unforgiving, since a 50 percent loss requires a 100 percent gain to break even. Bear markets also transfer assets from leveraged and impatient holders to liquid and patient ones, which is why long-term returns are so often decided by behavior during declines rather than selection during rallies.

Both assets in this site's title know the territory. Gold fell roughly 45 percent from its 2011 peak to its 2015 low, and spent two decades under its 1980 record. Bitcoin's bear markets have exceeded 70 percent drawdowns in every major cycle.

In the gold vs bitcoin debate

Bear markets are each side's favorite evidence against the other. Gold advocates cite bitcoin's repeated 70 percent-plus collapses as proof it cannot store value; bitcoin advocates cite gold's 20-year nominal drought after 1980 as proof that stability can mean stagnation. The honest reading is that both are volatile monetary assets whose owners need conviction measured in years, and that the depth of a drawdown matters less than what the asset does across a full cycle.