The bulls & the bears of cryptocurrency explained

The bulls & the bears of cryptocurrency explained

March 10, 2022 0 By Maxim Hayden

What are bull and bear markets in cryptocurrency?

Your parents may have told you about the birds and the bees, but they never told you about the bulls and the bears…

In the crypto sphere the phrases feeling ‘bullish’ and feeling ‘bearish’ can regularly be heard being used across the space. However, what exactly do either of these phrases mean? 

What is a bull market? 

A bull market refers to a period of extended growth, where a large portion of overall security/coin prices across the market rise, in relation to the stock market, or the crypto market. 

The widely accepted definition of what constitutes a bull market, in terms of the stock market, is when prices rise by 20%, following two declines of 20%.  

However, in the world of crypto, a rise, or fall, of 20% is seen far too regularly to be used as an indicator. With this in mind, a price increase of 40% is usually required for crypto market growth to see its sentiment defined as that of a bull market. 

Bull markets are characterized by optimism, investor confidence, and expectations, on wider economic conditions. This is relevant to both the stock market, and the crypto market. However, in the crypto space, each major bull run is triggered by the halving of Bitcoin. It’s this that sees Bitcoin (BTC), and other crypto currency prices increase exponentially on a 4-year cycle. 

The main ways an investor can make the most of a bull market is to simply buy and hold, carry out an increased buy and hold strategy, add retracement additions, or carry out full swing trading. 

What is a bear market? 

In contrast to this, a bear market is when stock/security prices see a prolonged decline of 20% or more, when it comes to the stock market, and a decline of 40% or more over a prolonged period of time in crypto. 

A bear market can last anything from weeks, to months, to years. However, again, in the crypto space bear markets, are seen to fit into the 4-year Bitcoin (BTC) halving cycle. A long downtrend within the crypto market is also sometimes referred to as a ‘crypto winter.’ 

Even with a market being in a downtrend, there are still ways an investor can make the most of these conditions. These include short selling, put options, and EFTs. Alternatively, an investor can buy and hold in projects they believe in, ready for the next bull run. They can do this by dollar cost averaging on a coins decline, or by trying to time where the bottom is. However, the latter is often referred to as trying to catch a falling knife, and can be as risky as trying to do exactly this.

Bull and bear markets can also relate to bonds, currencies, commodities, or real estate. Although, the stock market and crypto are the most commonly associated with these terms.