The names "bull" and "bear" are frequently used in cryptocurrency and stock market discussions. However, what do they imply, why were they named so, and how should you behave during each market stage? For solutions, continue reading.
Bull markets are periods of considerable and continuous market expansion. Moreover, Bear markets are periods of constant and significant market downturns. Each offers a unique variety of possibilities and dangers.
The rising motion of a bull's horns when it rushes and strikes is supposed to be the source of the term "bull market." In a cryptocurrency bull market, prices are soaring, optimism is at an all-time high, and the arrow on the charts is heading upward.
The expression is so deeply ingrained in the financial industry that Manhattan's financial district showcased a vast bronze bull sculpture in 1989. An identically large monument of a robotic-looking bull premiered at the Bitcoin 2022 summit in Miami.
A bearish market, in contrast, is thought to have gotten its name from the downward direction a bear's claws do when it strikes. The saying "don't auction the bearskin until you've captured the bear" from the 1600s is referenced in another popular hypothesis about the word's genesis. By the 16th and 17th centuries, "bearskin" was a slang word for speculative stock purchases, or what we now refer to as short-selling.
A bull market, sometimes known as a bull run, is characterized by widespread investor buying, excess demand over available supply, high levels of investor confidence, and price increases. Suppose values in a particular market are moving swiftly up. In that case, this might indicate that most traders are growing confident about the price rising further, which could mark the beginning of a bullish trend.
Bullish investors hold the view that values will rise over time. A positive feedback system that tends to attract additional investment and drive prices higher develops as investor confidence increases.
Some traders employ the "market mood" metric to gauge traders' optimism in a specific market because investor sentiment in a particular coin significantly impacts that asset's value.
An economy's expansion, seen by a nation's GDP, rising employment levels, or low-interest rates, fuels bull markets.
In some market situations, however, trader psychology is also greatly influenced by market mood or the general opinion of the financial sector, in addition to these objective measurements.
In the grand scheme, the bull run phase is relatively straightforward: Traders purchase when these criteria appear favorable. Prices rise as more people compete for these limited resources.
The reasons for a bullish crypto trend differ slightly from those for traditional bull markets since cryptocurrencies are a more recent investment option that differs from them in many ways. For example, public figures have been known to start crypto bull markets by tweeting about different cryptocurrency projects they favor.
Introducing a new crypto product by a well-known financial institution, such as an exchange-traded fund or a cryptocurrency trust, can signify tremendous investor confidence.
Here is how you will get to recognize a cryptocurrency bull run:
Persistent price increases.
Persistently rising interest in assets.
An increase in news stories concerning market booms.
Elevated levels of trader's confidence.
Hundreds of thousands of new investors are joining the marketplaces.
Prices are barely affected by bad news.
Positive news drives prices considerably higher.
Overcharging for some projects;
The inclusion of cryptocurrency-related discussions in both traditional media and social media.
In a bearish crypto trend, the value of the cryptocurrencies drops sharply from the recent peak and keeps decreasing. You can see less favorable press coverage or more critical articles about cryptocurrencies throughout a bear market.
While a bear market in cryptocurrencies has all the same characteristics as one in stocks, they are typically more unstable, and their values may decline further. Even though the market capitalization of cryptocurrencies reached one trillion dollars in the early 2020s, they are still in their infancy compared to American stocks or rare metals.
A bear market can begin when the economy faces a recession or immediately afterward. But the elements might change.
For instance, signs of a bear market were numerous shutdowns and rising unemployment levels as the COVID-19 epidemic loomed around the globe.
Contrarily, deteriorating economic factors, such as staff cuts, a slowdown in company achievement, high levels of inflation, rising unemployment, and rising interest rates, might lead to the usual bearish trend.
Most investors view these unfavorable signs as the first warning signs of a contracting economy. They will shift from trying to maximize revenues to a desire to safeguard capital. As a result, many people will start selling their more risky investments and investing their money in safer assets like gold or treasury securities.
Selling causes the industry to grow more slowly, which worries other traders or market participants. As a result, as more investors begin to sell, the interest for assets declines faster, the market becomes oversupplied, and prices continue to fall.
Common behaviors and attitudes that define a bear market include
Lower peaks and downturns
If the price of cryptocurrencies is in a bearish trend, investors should keep an eye on price declines. Even when the cryptos experience a brief upsurge, their prices typically bottom out at significant resistance points before continuing to decline. Cryptocurrencies are in a bearish trend when they keep making lower lows and highs over numerous periods.
Minimal or inadequate media attention to cryptocurrencies
When a cryptocurrency market downturn occurs, there are fewer stories regarding the Web3 sector. News outlets typically only feature cryptocurrencies during the maniacal heights of a bull run. Worse still, cryptocurrency may be the subject of the massive negative press during a bearish trend.
Reduced on-chain activity
Compared to a bull run, a bear market for cryptocurrencies is likely to witness a decrease in the use of blockchains. As connectivity declines, there may be less enthusiasm for cryptocurrencies, which frequently equates to lower demand for virtual assets.
Increased stablecoin production
Crypto investors frequently convert their cryptocurrency assets into stablecoins to reduce risk. Since more cryptocurrency traders are staying away during down periods, the market capitalization of stablecoins may rise.
