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As we’re nearing the end of the first quarter of 2025, US president Donald Trump’s administration has been in charge of the world’s largest economy for only about two months. But in this short period of time, the 47th POTUS has already been making an outsized impact on financial and crypto markets — as the threat of tariffs with many of America’s trading partners, government sector layoffs and a new paradigm in the relationship between the US and European economies have sent investor sentiment into the territory of fear. Both stock market sentiment indices and the major Bitcoin Fear & Greed indices are hovering between the orange and red zones of fear.
As of the time of this writing on Mar 17, 2025, the stock market’s primary gauge — the S&P 500 index — has declined by around 8% since its recent peak on Feb 19, 2025, while Bitcoin (BTC) is down by 23% since its all-time high on Jan 20, 2025, the day of Donald Trump’s inauguration.
As the crypto market declines, investors are becoming more unsettled, wondering if this drop represents another blip on the typically mercurial radar of Bitcoin or a prelude to a steeper downturn. Is this the market correcting itself after recent (possibly overly) optimistic gains, or are we witnessing the start of something scarier? In this atmosphere, it's important to distinguish between a market correction and a more profound decline known as a bear market. In this article, we cover what a crypto market correction is, how it differs from a bear market and — more importantly — how you can prepare for it as a cryptocurrency investor.
Key Takeaways:
In the traditional stock market, a market correction is a decline between 10% and 20% in asset prices. In contrast, a market crash occurs when prices drop by more than 20%.
The crypto market experiences corrections and crashes significantly more often than the stock market, but also characteristically recovers from these downturns.
Valuable strategies to prepare for a market correction involve removing exposure, utilizing stop-loss orders, automating your trades and employing investment methods such as dollar-cost averaging (DCA).