Typically, the terms "bull" and "bear" are used to indicate how the stock markets are operating – whether their value is increasing or decreasing. A market that is increasing is referred to as a bull market and one that is decreasing as a bear market.
These terms are used to describe lengthier periods of either largely upward or downward movement because the crypto market is typically volatile and varies on a daily basis. Similarly, significant swings in either direction (of at least 20%) point to market developments.
We'll concentrate on how these trends relate to cryptocurrency in the below article. In particular, we'll talk about: What are bullish and bearish markets? What distinguishes bull markets from bear markets? And how to determine if we are in a bull or bear market.
WHAT IS A BULL MARKET?
It simply refers to rising prices in a market (stocks, cryptocurrencies, or anything else). The American Financial Services company Morningstar, Inc. examined the stock market for a period of around 90 years (1926–2014) and found that the average bull market lasted about eight and a half years, with a 20% increase from a stock's low typically indicating the start of a bull market.
In a bull market (also known as a bull run), prices rise, demand outpaces supply, and confidence in the market is at an all-time high. 2021 provided a textbook example of a cryptocurrency bull run before the May 2022 crash. The first half of the year saw a boom in cryptocurrency prices, with many reaching all-time highs (ATH) in November 2021. Global companies such as PayPal, MasterCard, Tesla & MicroStrategy all jumped on the bandwagon and adoption was seemingly at an all-time high.
WHAT CAUSES A BULL MARKET?
- Crypto and governmental regulations - if the cryptocurrency industry receives regulatory certainty, it can entice investors who have been on the fence about running into compliance issues
- Crypto and fiat currency inflation - Globally, most fiat currencies are struggling with inflation, which could lead to an increase in the number of people switching to Bitcoin as a hedge against inflation.
- Bitcoin halving - history shows that after every halving there has been a spike in Bitcoin prices.
CHARACTERISTICS OF A BULL MARKET
Typical behaviours and attitudes that define a crypto bull market include:
- price increases that are sustained throughout time;
- a rise in market confidence among investors;
- poor supply despite high demand;
- the inclusion of cryptocurrency-related discussions in both traditional media and social media;
- a modest decrease in pricing when negative news is announced.
- general interest in cryptocurrencies among influential people, celebrities, and other groups who may not have previously shown such an interest;
- hard price increases after positive news;
WHAT IS A BEAR MARKET?
In a bear market, the value of cryptocurrency drops by at least 20% and is still declining. As an example, consider the well-known cryptocurrency meltdown in December 2017 when investors witnessed Bitcoin drop from $20,000 to $3,200 within a short period of time.
A decline of 20% or more from prior highs is indicative of a declining bear market. As a result, prices are low and steadily declining. The downward pattern continues as a result of the declining trend, which also impacts investors' expectations.
WHAT CAUSES A BEAR MARKET?
A bear market in cryptocurrencies can be brought on by a number of things, including:
- Excessive speculating and investor euphoria - When investors become overly enthusiastic about a particular asset, they have a tendency to drive prices up too quickly, which can lead to an unsustainable bubble that bursts and trigger a market correction.
- Fear of missing out (FOMO) - when investors notice prices increasing quickly, they may invest without conducting adequate research, which can lead to a self-fulfilling prophecy where prices rise merely because more people are purchasing. The same investors typically initiate a trend by selling off their assets once they've realised what they perceive to be a sizable profit, which then sparks a trend and drives the prices down once more.
- Hacking of exchanges - if a large exchange is compromised and investors lose a sizable sum of money, it may cause a sell-off and correction on the entire market.
- Uncertainty over regulations - cryptocurrency sell-offs and corrections are possible whenever there is uncertainty around regulations. For instance, values plummeted after China declared in 2017 that it would crack down on cryptocurrencies.
CHARACTERISTICS OF A BEAR MARKET
Typical characteristics of a crypto bear market include:
- Decreasing prices over a sustained period of time;
- Supply is greater than demand;
- Lack of investor confidence in the market;
- No talk of cryptocurrency in mainstream 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.
WHAT’S THE MOST IMPORTANT THING TO REMEMBER DURING A BULL OR BEAR MARKET?
No matter what the markets are doing, the most important thing for you to do as an investor is to protect your assets! And the best way to do that is by storing them on a cold storage hardware wallet. Cold storage hardware wallets allow you to move your assets offline AND keep ownership of your private key. Your private keys are generated and stored on the hardware wallet which is then protected by a PIN and an optional passphrase. The keys are never exposed to the internet so they can’t be stolen or copied. That’s why it’s known as cold storage. You and only you are in ownership of your assets.
Here at Coinstop, we want to help you secure your cryptocurrency. That’s why we stock the very best in digital security. From hardware wallets to recovery seed phrase storage devices, our products will help you to become your own bank. Cryptocurrency is the future, and it’s time to start securing yours!