Bull vs. bear crypto market: What’s the difference and how to handle both. Stock markets are usually described as “bull” or “bear” when they appreciate or depreciate. Rising markets are bull markets, whereas falling markets are bear markets. The crypto market is volatile and varies daily. Therefore, these words allude to extended periods of predominantly upward or downward movement. At least 20% swings in either direction suggest market shifts. This article examines how these trends affect cryptocurrencies. Specifically, what is a bull or bear market? What differentiates bull and bear markets? How do you spot a bull or bear crypto market? The main distinctions between bull and bear markets and how to invest in each.
What is a bull market?
Bull markets are good economic times. It indicates a market advance and a positive investor mood. Rising asset-priccharacterized economy and high employment characterise bull markets. This applies to traditional and cryptocurrency markets. However, cryptocurrency bull runs are more robust and more consistent. Crypto bull runs—what’s typical? Price increases of 40% in one to two days are expected. Crypto markets are smaller and more volatile than traditional markets.
Bulls battle with their horns raised, which may have inspired the phrase “bull market”. Today, a “bullish” market or investor expects an asset’s value to rise. The charging bull signals a crypto market bull run. Cryptocurrencies rise with favourable economic conditions and enthusiastic investors aiming to maximise portfolios. Investors launch bull markets by buying securities. Fiat currency can also be used because bullish markets raise security prices. Demand exceeds supply. Thus, the bull market continues. The bull eventually tyres, and the market becomes bearish.
What causes a bull market?
As noted, investors start bull markets. When they think prices will climb for a long time, they acquire stocks at a low cost and are enthusiastic about their ROI. Stock prices rise as investors become more optimistic. Bull markets could result from other sources. These include a strong GDP and low unemployment. Favourable market conditions boost investor confidence. Comparable forces impact traditional and cryptocurrency bull markets. Crypto markets are new compared to regular securities, which have been operating for centuries. Narrow factors with fewer investors may drive crypto.
Characteristics of a crypto bull market
The following attitudes and actions distinguish a bull market:
- Prices have been steadily rising.
- High demand and low supply.
- Improved market sentiment among investors.
- Some projects are overpriced.
- Promotion of cryptocurrency-related topics in traditional and online news outlets.
- The growing popularity of cryptocurrencies among people who may not have previously been interested in it, such as public figures and representatives from different industries.
- Sharp price increases in response to positive news.
- If there is terrible news, prices fall slightly.
What is a ‘bull run’ in crypto?
A bull run is a term that describes an extended period in which many investors purchase cryptocurrencies. The above qualities, such as rising prices, demand outweighing supply, and high market confidence, all indicate this market environment. Typically, increased investor confidence creates a positive feedback loop, extending a bull run (more investments, further rise in prices). The level of trust that investors have in a particular asset is one of the primary factors that determines the price of that asset. This is especially true for cryptocurrencies.
What is a bear market?
In contrast, a bear market occurs when cryptocurrency prices have fallen by at least 20% and are still falling. In December 2017, Bitcoin fell from $20,000 to $3,200 in a few days. Declining bear markets drop 20% or more from previous highs. Prices remain low and falling. Negative trends damage investors’ outlook and continue a negative tendency. The term ‘bear’ is derived from a bear’s combat style, which involves starting high and attacking with claws and weight pushed down. A bear market slows the economy and raises unemployment. Poor economic policies, geopolitical upheavals, market bubbles, and natural calamities can cause these circumstances. Bear markets lack investor optimism and confidence, which is typical in bull markets.
Crypto traders typically buy assets during weak markets, particularly at rock bottom. Investors may hesitate to purchase low-value crypto that may not rebound because it’s impossible to tell when a bear market ends. The need drops prices when it hears terrible news about a cryptocurrency or asset. The downward spiral makes more people avoid investing because they think more terrible news is coming and they should prepare for the worst.
Characteristics of crypto bear markets
The following attitudes and actions distinguish a bear market:
- A prolonged period of falling prices;
- There is an overabundance of resources;
- Investors’ disillusionment with the market;
- No positive or negative coverage of cryptocurrencies anywhere in the media;
- Traditional financial institutions, economists, and analysts are often sceptical of cryptocurrencies.
- If there is good news, prices will rise less quickly;
- In the face of unfavourable information, prices fall.
Bull vs. bear market: Key differences
Many ask, “How do you tell if a crypto market is bull or bear?” Bitcoin prices shape both, but investors should recognise distinctions. Bull and bear market patterns affect cryptocurrencies similarly to stocks. Due to cryptocurrency’s volatility, trends differ. Crypto markets move faster when bull or bear trends begin. Stock bull and bear markets are accessible to recognise. Investors give input that affects crypto differently than equities. Thus, it may not be accurate.
Suppose crypto markets are recovering from a bear market. At the bottom of a bear market, investors usually become bulls. This will accelerate crypto price increases. Crypto bull markets move faster than stocks. Their lifespans range from a few days to a month. As the bull market strengthens, investors will sell currencies and cash out, causing a slowdown. Due to volatility and exchange speed, bull and bear markets affect crypto differently than stocks.
Differentiating features of bull and bear markets include:
Supply and demand
Bull markets have high cryptocurrency demand and little supply. Few investors are willing to sell crypto, but many want it. Investors scramble to buy what’s available, raising prices. Unlike investment, more people sell than buy in a lousy market. Prices fall as demand falls below supply.
Market Scenario
Rising GDP signals a bull market, whereas falling GDP signals a bear market. GDP usually rises with company income and employee compensation. Together, they boost consumer spending. Conversely, weak company sales and stagnant salaries diminish GDP. Bear markets occur during recessions when GDP falls for two quarters.
Impact on economy
Bear markets indicate weak economies. Companies miss sales objectives, and customers don’t spend enough, hurting profits and the economy. Due to the situation, people hesitate to trade or invest in Bitcoin and equities. However, a robust economy boosts consumer spending and profits in a bull market. Bull runs enable stock and crypto trading.
Outlook of investors
Investor psychology and crypto market performance are linked. In a bull market, bitcoin prices promote investor confidence. As a result, more investors are encouraged to invest in the market for profit. In a bad call, investors dislike crypto. In a panic, some sell their stocks, lowering prices and encouraging additional investors to do so.
Stock price
Current bitcoin values are a simple way to tell if a market is bullish or bearish. Rising asset prices signal market confidence and a bull run. As asset prices fall, confidence drops, and a bear market begins.
Is it better to buy in a bull or bear market?
Crypto traders buy in downturn markets to take advantage of lower prices. They have a better possibility of making money in bullish markets. Buying during a bull market has advantages. Buying in bull markets can boost your gains as the market rises. Both strategies, like any trading tactics, include dangers. Understanding past trends and staying current with Bitcoin news is crucial. While investing in crypto, you’ll likely encounter bulls and bears, so consider supporting both.
How to invest in a bull market?
To buy early in a bullish market, you should spot the trend early. You can sell later at higher prices when the market peaks. Bull markets remain long. Therefore, losses are usually minor and fleeting. What if a crisis or regulatory intervention triggers a bear market? This is when you should cut your crypto positions, especially those in less-proven crypto. You may want to temporarily switch to precious metals, cash, or other assets. This is because they are more crash-resistant. After strong markets, cryptocurrencies tend to be cheaper, so watch out and increase your investments.
How to invest in a bear market?
Bear markets are riskier since prices are lower and investors are less confident in cryptocurrencies. This risk may yield more significant profits in the future. Consider buying and selling cryptocurrencies at lower costs during the next bull market. Investors often sell their stocks when they spot downtrends, then repurchase them at a lesser price as the market declines. Its duration is unknown when a bear market is fueled by recession or other factors. Thus, the question is how long the drop will remain and how much prices can fall. You may buy prematurely or miss an excellent investment.
Final thoughts
Several things influence bear and bull crypto markets. The cryptocurrency market has fewer investors and is more volatile than the stock market. Therefore, trading during bullish and negative markets differs. Crypto investors buy cheaply during bear markets and hold onto them for profit in the following bull market. Pro traders employ several tactics, such as observing the ‘rectangle pattern’ during bullish movements.
Remember that investing in bull or bear markets always involves risks. We advise you to perform your research to make the best option given the circumstances. To learn more about crypto, check out our How to Crypto guides, including a beautiful beginning post on how to get started. We offer extensive resources on Bitcoin, Ethereum, and Dogecoin. Reading helpful materials can help you learn industry terminologies and the best Bitcoin methods.