What Is a Bear Market? And How Do Traders Still Profit During One?

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A bear market is when the price of an asset or a market drops for a prolonged period of time. However, no matter what direction the market is going in, you can still make money from wise investments. Shorting derivatives (i.e. predicting the price of an asset will go down) can be profitable in a downtrend (but it also carries significant risk, especially in volatile markets). It’s also important to remember that certain investments will pay off in the long run, even if you have to wait many years. And just because crypto is going through a bear market, it doesn’t mean commodities are. So on platforms like Ouinex where you can trade both crypto and derivatives, you can make money from the upward trends in one market and downward trends in another.

Key Takeaways:

A bear market is when the price of an asset, or an entire market, drops by 20% or more from recent highs, usually over a sustained period.
A bear market can happen because of a recession, or it can trigger a recession, but one doesn’t necessarily lead to the other (there can be a bear market without a recession and vice versa).
A bull market is a period when asset prices, like stocks, crypto, or commodities, rise consistently over time, driven by strong investor confidence and positive economic indicators.
A bear market for stocks, doesn’t mean a bear market for crypto, or commodities. By diversifying, you can make smart investments.
By going short on derivatives (predicting the price will go down), you can make money from downward trends in the market.
Long-term investments where you buy during a bear market can also pay off in the long run.

What Is a Bear Market? And Can You Still Make Money During One?

You’ve probably heard the term “bear market” thrown around during market downturns. It sounds ominous—like something you should avoid at all costs. But what does it actually mean? And does a bear market really mean you're doomed to lose money? Not necessarily.

Let’s break it down.

What Is a Bear Market?

A bear market is when the price of an asset, or an entire market, drops by 20% or more from recent highs, usually over a sustained period. It reflects a broad, negative investor sentiment and tends to come with falling prices, pessimism, and often, a lot of panic-selling.

Bear markets can affect everything from individual stocks to crypto, commodities, and even the broader economy.

In crypto, where volatility is the norm, bear markets can feel extra brutal. Tokens that were mooning just weeks ago can suddenly be in free fall. Headlines scream doom. Retail traders bail out.

But here’s the thing: a bear market doesn’t mean you can’t make money.

A Bear Market for Stocks Doesn’t Mean a Bear Market for Crypto or Commodities

As seen lately (early 2025), when there is uncertainty in the marketplace, people often turn to commodities. Gold soared in the past few months, and after first taking a nosedive, so did crypto.

When one market goes down, another sometimes goes up.

By diversifying, you can ensure that you can make a profit even when one market goes bearish. And even if all markets are bearish, there are still opportunities, as you’ll see below.

You’re Not Powerless in a Bear Market: Derivatives Is a Powerful But Risky Bear Market Toolkit

Just because prices are dropping doesn’t mean all opportunity disappears. Traders who know what they’re doing can absolutely profit during downtrends. One of the key ways? Shorting, or going short. That means you short sell an asset, like a derivative.

When you short an asset, you’re essentially betting that the price will go down. In traditional finance, this involves borrowing an asset and selling it, hoping to buy it back cheaper later. In crypto and derivatives markets, shorting usually means using derivatives contracts (CFDs) like perpetual futures.

Derivatives are financial contracts that derive their value from an underlying asset, such as Bitcoin, Ethereum, stocks, or even commodities (like gold) and indices. On Ouinex you can trade spot crypto, as well as crypto perps and derivatives for traditional assets.

CFDs let you go long (bet on the price going up) or short (bet on the price going down). That means whether the market is booming or bleeding, you’re not locked into a single direction. You’re flexible.

And in bear markets, flexibility = power.

So instead of just holding and hoping, you can actively trade the trend and profit from it.

Risk Still Exists

First of all, most derivatives come with leverage, be that 2x, 10x, or 200x. Meaning if you invest $10 and it’s 10x, you trade with $100. This means you can make a big profit…or loss.

This is why people using derivatives trading do so with a lot of care…and sometimes as a way to hedge.* You can keep your BTC (i.e. your actual bitcoin) as the market goes down…but go short on some BTC to offset a potential loss in the short run.

Bear markets are tricky. They come with higher volatility and lower liquidity (less people are buying and selling). Prices move fast, sentiment shifts quicker, and the overall tone of the market is often fear-driven. But if you’re disciplined, educated, and using the right tools, you can find solid opportunities.

Not everyone runs from a bear. Some traders hunt it. Raar. (Okay, fine. That’s as cheesy as the joke in the video. Got it.)

*Hedging is when you make an investment that protects you from losing too much if another investment goes bad. For example, if you own a stock and you’re worried the price might drop, you can make another trade that will earn money if the stock does fall. That way, no matter what happens, you’re safer from big losses. You can read a more detailed explanation in our trading glossary.

Tips for Bear Markets

Here are some tips for staying afloat during a bear market:

Never invest more than you can lose (goes for any market conditions)
Hedge (if you own a certain stock, or crypto coin, but fear the price will go down, short the same stock or crypto coin to minimize potential short-term loss)
Diversify (invest in different asset classes)
Go short on assets you believe will take a downturn (but be clear that using leverage or margin trading means the potential gains and losses multiply)
HODL: hold onto the assets you believe will, in the long run, gain in value (but perhaps hedge if you think they’ll go down in the short run)
Buy up the assets you think will recover and gain in value in the long run

The Bottom Line

A bear market is a 20%+ drop in price over time, driven by negative sentiment.
It doesn’t mean all hope is lost. You can still profit by shorting assets using derivatives, or trading on markets that aren’t bearish (diversify your investments).
Tools like perpetual futures allow trading in both directions, but come with leverage and liquidation risks.
Hedging is a risk management tool you can use during bear markets.
When prices go down, it can be a good time to buy assets you believe will gain in value in the long run…but if it might take years, be prepared to lock up your assets for that long.
Bear markets are riskier, but not unwinnable.

FAQs About Bear Markets and Derivatives Trading

What is a bear market in crypto and traditional finance?
A bear market is when prices drop 20% or more from recent highs. It reflects negative investor sentiment and typically comes with lower trading volume, panic selling, and falling asset prices.

How long does a bear market usually last?
There’s no fixed timeframe, but bear markets can last weeks, months, or even years depending on macroeconomic factors, industry news, and investor confidence.

Can you make money in a bear market?
Yes. You can go short on assets using derivatives contracts, such as perpetual futures. Also, a bear market is a great time to buy in many cases. In addition, just because one asset class, like crypto, is experiencing a bear market, it doesn’t mean another asset class, such as commodities, is facing one.

Platforms like Ouinex allow traders to trade spot crypto, as well as crypto perps and derivatives for traditional assets like commodities (gold, oil, etc.), stocks, stock indices, and Forex.

What does it mean to short an asset?
Shorting means predicting that an asset’s price will fall. In crypto or TradFi derivatives trading, this is done using instruments like CFDs and perpetual futures.

Why are bear markets common in crypto?
Crypto is highly volatile and sentiment-driven. Sudden regulatory changes, market panic, or macroeconomic shifts can trigger sharp downturns, making bear markets more frequent than in traditional finance.

What tools can traders use during a bear market?
Derivatives like perpetual futures allow traders to take short positions, meaning you predict the price of an asset going down and make money if you’re correct. This is one way of making money during a bear market. You can also invest in other markets that aren’t experiencing a downward trend at the moment. You can also offset potential losses with hedging.

Ouinex offers spot crypto, crypto perps, and TradFi derivatives, enabling you to stay active in all market conditions.

Is derivatives trading risky in a bear market?
All trading carries risk, especially in volatile markets. But with the right risk management tools, including stop-losses and slippage controls, as well as hedging, you can trade strategically even in a downturn. You just have to stay informed and never trade more than you can afford to lose.

How is Ouinex different during bear markets?
Ouinex gives you access to spot crypto, crypto perps, and traditional asset derivatives, fast execution, deep liquidity, and a no-CLOB model that ensures fairer pricing, which is especially critical in fast-moving bear conditions.

Do bear markets impact all crypto assets the same way?
Not always. Major coins like Bitcoin and Ethereum may drop slower than smaller altcoins, which can be more volatile. Diversification and smart positioning are key.

What’s the best strategy in a bear market?
There’s no one-size-fits-all strategy. Some traders short the market using derivatives. Some hedge. Some buy up assets they believe will gain in value once the market recovers. Some HODL. Others reduce risk and wait. Education, timing, and knowing how much you can afford to lose matter the most.