How to Accurately Identify a Bear Market
In the investment field, accurately determining whether the market is in a bear market is crucial. So, how can we know if the market is currently in a bear market?
First, let's clarify the definition of a bear market. When prices drop by 20% or more from their highest point, and this downward trend persists for a long period, accompanied by widespread negative sentiment among investors, the market is in a declining state. This price drop is not just a brief fluctuation over a day or two; it lasts for weeks or even months, with no significant signs of rebound.
From the market performance perspective, in a bear market, the prices of various assets generally fall. Taking the stock market as an example, most stock prices will continue to decline, whether they are blue-chip stocks or small-cap stocks, none can escape this fate. Many previously favored quality stocks will also follow the overall downward trend of the market. In the cryptocurrency market, mainstream coins like Bitcoin and Ethereum see their prices significantly shrink, and many altcoins plummet to distressing lows.
Trading volume can also reflect the characteristics of a bear market. Typically, during a bear market, trading volume gradually shrinks. Investors are not optimistic about the market outlook, leading to decreased enthusiasm for trading, and both buyers and sellers become cautious. For example, in the securities market, the once bustling trading hall becomes eerily quiet, and the activity level of stock trading significantly declines; on cryptocurrency trading platforms, daily trading volumes also noticeably drop.
Investor sentiment is also an important reference indicator. During a bear market, investors are generally filled with fear and pessimism. Social media and investment forums are flooded with various negative comments and concerns about the market. Many investors choose to sell their assets, holding cash on the sidelines, fearing further losses. Institutional investors also reduce their capital contributions, or even withdraw some funds.
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