“Bull” and “bear” are typically used to describe how stock markets are performing — whether they are appreciating or depreciating in value. In this context, a rising market is called a bull market, while a declining one is called a bear market.
Given that the crypto market is generally volatile and fluctuates on a daily basis, these terms are used to refer to longer periods of either mostly upward or downward movement. Likewise, changes in markets are indicated by substantial swings (at least 20%) in either direction.
In this article, we’ll focus on how these trends apply to cryptocurrency. Specifically, we’ll discuss: What is a bull or bear market? What characterizes bull vs. bear markets? How to know whether we are in a bull or bear crypto market? The key differences between bull and bear market, and how to invest in a bear vs. bull market.
What is a bull market?
A bull market refers to generally favorable economic conditions. It means that a market is on the rise and is also usually accompanied by positive investor sentiments concerning the current uptrend.
There is a sustained increase in asset prices in a bull market, accompanied by a strong economy and high employment levels.
This applies to cryptocurrency markets as well as traditional markets. In cryptocurrency, however, it is more common to see stronger and more consistent bull-run crypto phases.
What is a bull run in crypto typically like? A 40% increase in price over one to two days is quite the usual scenario. This is because crypto markets are relatively smaller than traditional markets and are, therefore, also more volatile.
Characteristics of a crypto bull market
The typical attitudes and actions that characterize a bull market are:
Increased prices over a sustained period of time;
Strong demand despite weak supply;
Increased investor confidence in the market;
Overpricing of certain projects;
Insertion of talks about cryptocurrency in mainstream media as well as social media;
General interest in cryptocurrency among celebrities, influencers and other sectors who might not have been interested in crypto before;
Hard rise of prices in the event of good news
What is a bear market?
On the other hand, a bear market is one in which the value of cryptocurrencies has fallen by at least 20% and is continuing to fall. An example includes the famous cryptocurrency crash in December 2017, when investors saw Bitcoin fall from $20,000 to $3,200 over the course of a few days.
A declining bear market is characterized by a dip of 20% or more coming from previous highs. As such, prices are low and dropping continuously. The downward trend likewise affects investors’ outlook and perpetuates a further downward pattern. The term ‘bear’ is believed to have come from a bear’s fighting style — starting high, then attacking with claws downward and all its weight pushing down.
During a bear market, the economy is slow with high unemployment rates. These conditions can arise from poor economic policies, geopolitical crises, burst market bubbles and even natural disasters.
Characteristics of crypto bear markets
The typical attitudes and actions that characterize a bear market are:
Decreasing prices over a sustained period of time;
Supply is greater than demand;
Lack of investor confidence in the market;
No talk (or negative talk) of cryptocurrency in mainstream media as well as social media;
General distrust in cryptocurrency among economists, analysts and traditional finance;
Lower highs in the event of good news;
Lower lows in the event of bad news.