Both bull and bear markets are very important in the cryptocurrency world. And as an investor, you just need to have a good understanding of the two. This will help you know the right thing to do – and at the right time. The two terms are typically used to describe how the crypto market is performing at a particular time. When the market is rising, it is called a bull market, and when it’s falling, investors call it a bear market.
There are many factors that can contribute to either of these markets. Each of them has its unique characteristics, and a seasoned investor should always know when either a bullish or bearish market is coming.
In this post, we will be taking you through a quick journey of what a bull market and bear market are, as well as what you should do in each season to preserve your investments.
What is a bull market?
A bull market is a period of time in which the prices of crypto assets are rising and investors are optimistic. The term “bull” comes from the analogy of a bullish fighter who attacks by thrusting its horns up into the air. In contrast, a bear market is a period of time in which prices are falling and investors are pessimistic. The term “bear” comes from the analogy of a bear biting down on its victim with its teeth.
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Generally, a bull market is defined as an increase of 20% or more over a two-month period, while a bear market is defined by the market going down aggressively over time. The cryptocurrency market is currently experiencing a bull market, with the prices of many coins increasing by over 20%.
However, all bull markets come to an end and are followed by a bear market. As the market starts to rise, there becomes more and more greed in the market until it eventually peaks and turns into a bear market.
What Causes a Bull Market?
Bull markets are typically started by investors who become optimistic about the future of a particular coin or asset and buy in large quantities, thereby driving prices up. The cryptocurrency market is influenced by similar factors as traditional securities markets, such as institutional investment and public sentiment.
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It’s possible that the increasing optimism from traditional finance institutions may also lead to an increase in institutional investment in the crypto market. Additionally, there is speculation that people are turning to cryptocurrencies as a safe haven during the COVID-19 pandemic.
Characteristics of a crypto bull market
Crypto bull markets are characterized by a number of factors, the most important being an increase in prices over a sustained period of time. In addition, there is usually strong demand for coins/tokens despite a weak supply. This results in projects being overpriced, as investors are willing to pay more than the actual value of the project.
Also, mainstream media and social media are talking about cryptocurrencies more than ever before. This increased attention brings in new investors who might not have been interested in crypto before. Plus, celebrities and other influencers are getting involved in the space, lending their credibility to digital assets.
Finally, traditional sectors that had not shown interest in crypto are starting to explore it as an investment opportunity.
What Is a ‘Bull Run’ In Crypto?
A bull run is an extended period during which cryptocurrency prices are on the rise and investors are buying in. The term is often used to describe a market where confidence is high, demand outweighs supply, and prices are constantly going up. This positive feedback loop can keep the bull run going for some time until something eventually happens to burst the bubble.
What Is a Bear Market?
We have talked so much about bull markets. Now, let’s take a look at what a bear market also looks like too. A bear market is a time when the stock market falls by 20% or more from its peak value. It typically lasts for at least two months, and during this time, the economy may shrink as people lose confidence in it.
This happens due to factors such as oversupply of goods in the marketplace, recession in other countries, and increased demand for products. People may get scared during a bear market and start to put their money into less risky places such as bonds or cash.
Characteristics of a Bear Market
Like the bull market, the crypto bear market also has its own characteristics. These are typical actions and attitudes that show that we are in a bear market. Let’s see some of them below:
- Consistent drop in prices over a sustained period of time
- Demand is lower than supply in the market
- Mainstream media and social media not saying good things about cryptocurrency
- Investors losing confidence in the market
- Economists, analysts, and traditional finance losing trust in cryptocurrency
How Should Beginners Invest; Should You Buy In Bullish Or Bearish?
This is a very common question among beginners. They want to know which of the markets is the best time to invest. Well, both of them are good times to buy. If you buy during a bearish market, you will enjoy the privilege of buying at lower prices. And when the market eventually comes back up, you can sell at higher prices and make a good profit during the bearish season.
On the other hand, you can also buy during a bull market. That will help contribute to the uptrend of the market, further helping to drive crypto prices up across the board. However, you should know that both strategies also come with risks.
Therefore, the key always lies in being able to accurately predict market trends and staying updated with crypto news. The crypto space is full of ups and downs, so you should have a solid bull or bear trading strategy to help you weather any type of market.
The best time to start investing is right now, regardless of the market conditions. Beginners should know how they plan to invest no matter the market. That way, they can make informed decisions and stick to their plan, even when the market is volatile.