We are pretty sure that you have come across such expressions as bullish and bearish markets. But what exactly does it mean when it comes to the cryptocurrency market? Today you will find it out.
Where did the bull and bear market get their names?
The actual origins of these expressions are unclear, but one reason could be named for the way bulls and bears attack their victims. A bear swipes its paws downward and gets ready to attack, thus becoming a metaphor for market activity under these conditions. And bull attacks by thrusting its victim upwards with its sharp and powerful horns.
What is a bull market?
Do you see that the cryptocurrency market soars over a period? That is a market in which prices are rising or are expected to rise.
A bullish trend is characterized by long strategies, and growing market: strong demand and weak supply for securities.
The most part of traders are full of optimism and positive growth. They are ready to hodl their cryptos and sell high as soon as the price will reach its peak.
There is no specific metric to find out if it is bull market or not. The most common definition of a bull market is a situation in which price soars by 20%, usually after a decline of 20% and before a second 20% decline. Sometimes, a trader cannot fully assess the market situation because of a bull trap that exists on the market at the moment. Read a simple explanation of “what is a bull trap?”.
What is a bear market?
The bear market means the opposite of a bull market. It is a market in which prices are falling, encouraging selling. The demand is significantly lower than supply and, as a result, prices slide down.
Bearish trend is characterized by heavy pessimism about the declining market prices scenario, low trading activity, and short strategies.
Traders are concerned about the situation: the price has reached its peak and it will probably fall sharply. They start leaving the market and selling their funds in order to avoid losing money from the falling prices. Traders come back when the bear trade is over, and buy the dips.
Unlike bull market, bear market can be marked by a 20% downturn from recent highs. It is also important to note that sometimes traders might also meet a bear trap. One should examine the market to not fall into it. Read on a comprehensive explanation of “What is a bear trap, and how to identify it?”
How to act during bullish and bearish markets?
The best way to take advantage of the bull market is choosing the long strategy, buying the cryptocurrency as early in the trend as possible, and then selling your assets if they have reached their peak with a higher probability of making a return.
During the bear market, you have a great chance to lose, because your crypto assets are losing their value and the end of bear trend is not so obvious. Moreover, if you invest during this period, you can take a loss before any turning point appears.
Most crypto traders are shorting at this time, but the key here is not to miss the point on when to buy back when the market starts to turn around.
This is just a quick skinny of what bullish and bearish markets are. Of course usually it is easy to judge the market when it lasts for long and the whole market is talking about it, but of course the crypto traders who can determine the shift at the early stage are the ones who benefit the most. To know more about indicators that could be used for trend definition check out our articles on momentum, trend, and volume indicators. And once you are ready to trade you can always use our bots to help you out and does not matter whether you wanna go long or go short- our crypto trading bots can run both:).