Interestingly enough I think a protocol like this might actually perform well during a bear market.
I can't imagine people scrambling to pay back their loans as price declines and the market is in denial.
"Buy the dip" as they say.

It's probable that during a bear market many would actually want to use this feature even more because there are no liquidations. I think the real threat comes after the bear market is over. Once bear ends it becomes financially worth it to pay back the loans (example: paying back $1000 to get $1500 worth of collateral). This would put constant downward pressure on RUNE that could make it underperform against all forms of collateral.

It's safe to say that many would not want their collateral back in this situation unless they planned on dumping all of it for USD, which again helps RUNE because it lowers the collateral value that ThorChain is shorting. Will be interesting to see how all that plays out from the sidelines.