Bull and bear markets defined
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 3 min
In short
A bull market is a stretch of rising prices and a bear market a stretch of falling ones. Equity convention often calls a 20 per cent fall from a peak a bear market, but that is custom, not an official definition. Both labels are applied looking backwards.
Key points
- Bull means rising trend, bear means falling trend
- The 20 per cent threshold is convention only
- No official definition or authority exists
- The label always arrives after the fact
Definition
Terms for a period of sustained rising prices (bull) or sustained falling prices (bear). No official criterion defines the boundary; conventional rules of thumb are used instead.
The names are usually traced to a bull thrusting its horns upward and a bear swiping its paws down. Equity convention widely treats a fall of 20 per cent or more from a recent peak as a bear market, and a 20 per cent rise from a low as a bull market.
That 20 per cent figure has no particular justification; it is simply a shared rule of thumb among the press and market participants. Crypto's larger swings mean the same threshold flips back and forth repeatedly, which makes it awkward as a practical classification.
What matters is that both labels are only settled in hindsight. Calling a 20 per cent decline a bear market means little if a new high prints the following week, at which point it was merely a dip. Saying 'we are in a bull market' sounds like a statement of current fact but contains an unsettled judgement.
Watch out for
- · A label is not evidence about what prices do next
- · Definitions vary, so agree the criterion before debating the state of the market
- · Headlines announcing a market has 'entered' a phase reflect no official designation