Whether it’s in Crypto or the old-school financial markets, if you’ve been around for a while you’ve likely heard the terms “bull market” and “bear market”. Depending on just how long you’ve been in the game, you’ve likely even experienced one or the other – or both.
But what do those terms mean in Crypto, and what does it mean to be “bullish” or “bearish?” Let’s dive into it.
In simple terms, a bull market sees prices going up, while a bear market sees prices going down.
In traditional stocks, one of the indicators of a bull or bear market is a sudden change in price of at least 20%, as a rule of thumb. Crypto, however, tends to be much more volatile, rendering this indicator useless. A bull or bear market in Crypto, therefore, is only defined by a long (often called sustained) trend in one direction.
A bull market is a scenario where demand for Crypto projects outpaces supply, driving prices up. Everything’s hot, confidence is high, and everyone (or at least the majority) is buying.
This is typically a time when Crypto influencers go into overdrive, using the momentum of the market. New projects pop up everywhere, Crypto is making headlines with new all-time highs, and there isn’t a single party where Crypto is not part of the discussion.
A bear market, therefore, is the opposite: supply is higher than demand, making prices drop. Confidence is low, everyone is scared, and beginners often sell out in fear of a further drop.
In bear markets, Crypto users are forced to show face: because this is a time when news outlets regularly drop the question, “Is Crypto dead?” new users who bought into the last bull hype are often scared and sell out. More experienced users, on the other hand, show “diamond hands,” meaning they hold on to their assets because they know it’s just a swing. Or they “buy the dip” – more on that below.
If someone, therefore, is “bullish” on a project or token, it means they have high confidence and believe in rising values. A “bearish” investor, on the other hand, has a pessimistic outlook and expects a drop in value instead.
While it’s possible to be bullish or bearish on entire markets, such as Crypto, there are often nuances: an investor could be bullish on DeFi but bearish on NFTs, for example, depending on her or his knowledge and outlook for this specific segment.
So, now you know what they are – but remembering them the right way is hard for many people.
There’s a neat little trick for this one: Imagine you’re being attacked by a bull or a bear. Let’s hope that’s never going to happen, but you can likely picture the scene.
A bull will storm towards you with its head low and try to pierce you from below using its horns (which is why the Toreros in Spain are thrown high in the air.) The attack is upward – and so is the bull market movement.
A bear, on the other hand, will stand up before you and strike down with its paws. The attack is downward – and so is the bear market movement.
The answer is – complicated.
There is an old saying: “Time in the market beats timing the market.” Assuming that, in the long term, Crypto is going up, neither market situation is a better investment opportunity than the other. On the long horizon, it does not matter whether you bought assets in a bull or bear market, as they’ll go through swings but appreciate in value when you zoom out.
For the short-term investor, things look a bit different. Conventional wisdom dictates that the best time to buy is the end of a bear run – or the beginning of a bull run. That’s called “buying the dip,” and while the term sounds great and is used often, it’s usually a myth: nobody can predict the bottom; hence nobody can ever really buy the dip with 100% certainty.
The same goes for another popular saying: “buy low, sell high.” Again, it sounds foolproof, but just like nobody can reliable predict the bottom of any Crypto coin, nobody can predict the all-time high over a period of time.
Having said that, knowledge goes a long way: learning as much as possible about Crypto, the market situation, and particularly specific projects that might seem worth investing in can go a long way in as least coming close to those two popular sayings.
A bull market indicates a sustained upward trend: demand is higher than supply, investors are optimistic, prices are going up, and new users flock into Crypto.
A bear market is just the opposite: supply is higher than demand, investors are cautious if not downright pessimistic, prices are in a downward trend – and inexperienced users often sell out in fear of a complete loss.
Both markets offer interesting investment opportunities. The best strategy is to learn as much about Crypto as possible – and be ready for whatever market is around the corner.
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