Understanding Bull and Bear Markets in Cryptocurrency Trading
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What is the bear market?
A market turns “bearish” when there is a big market downtrend over a pretty short period. Basically, it is when you see that the price begins to quickly drop.
Some say that a market can be classified as a “bear market” once it sees a twenty percent dip over sixty days. That twenty percent figure is mostly trends and arbitrary are sometimes not that obvious. To recognize the less clear bearish pattern, many analysts use many systems and tools.
Bear markets are generally caused by slowing economies – this means economies that have disposable income, low employment, business profits, and generally, weak productivity.
What is the bull market?
Bull markets are against bear markets. They feature upward trends over little periods. These markets are generally characterized by optimism among investors, as they bring anticipations of price increases.
During a bull market, investors are more self-esteem as they generally expect reliable results continuing over an extended period (despite it being hard to continually guess trends).
In the globe of crypto, asset prices (and bull and bear markets in general) are powerfully influenced by speculative interest and public self-esteem. This results in a volatile market which hinges on what is famous as “market sentiment”.
Market sentiment is heavily influenced by:
- Mainstream/institutional adoption
- News announcements
- Supply matched to the demand for Bitcoin & other cryptos
- Media coverage
- Where we are in relation to the previous Bull Run
- Notable events (regulatory or technology updates, economic setbacks, security breaches, celebrity endorsement, etc
How to take advantage of a crypto bear market?
So, the high is over and the market has come collapsing back down along with any investments you did not cash out on when things were golden. While lots of crypto investors are diehard Holders and couldn’t care less about little term market spikes and crashes, riding the bull run all the way up just to ride it all the way back down can be a sore experience. Despite this being a nerve-racking time to put money in anything, a bear market provides the chance to amass some precious assets while the prices are dirt cheap.
Every time Bitcoin has dropped it has risen up again to even bigger heights. Historically, those who have chosen to buy up during a crypto bear market.
How does the crypto bulls and bear market work?
Cryptocurrency markets can be very lucrative but they are actually more volatile than the traditional stock market.
In greatly simplified terms, crypto markets (and their bull and bear run cycles) move according to market sentiment, speculative interest and many factors which include:
Previous market cycles: Previous bull/bear runs generally have a lot to say about how the present market will behave.
Press: The way the cryptocurrency is portrayed in the media and much exposure it is getting.
Notable events: Big events such as regulatory updates, celebratory or institutional adoption, economic setback and security breaches.
Supply: The full number of coins and the rate at which they are destroyed, released, or lost.
Market capitalization: The full value of all coins in existence and how users see the coin to be developing.
When will the crypto bull run end?
The question every person is asking is: When will the bull market crypto end?
While crypto bull runs historically have followed cyclical patterns that provide lots of insights into what will happen in the present bull run, there is a lot of proof to advise that the 2021 bull run will be different from previous bull runs.
The socio-economic climate is different, market response has progressed in an extremely big way for cryptocurrency and we are seeing institutional/mainstream adoption like never before.
In reality, no one really knows when the Bull Run will end – which is why we advocate taking some revenues from your gains as the market and your portfolio go up, which decreases some of your positions when you think the end of the Bull Run is approaching.
Whether that means moving your holdings to a stablecoin, Bitcoin, precious metals, or good old-fashioned cash, one thing is very clear. Many altcoins that went up during the Bull Run will come crashing back down when it is over.
Lots of altcoins will be overvalued towards the end of Bull Run so it is worth having some traditional goals and an exit technique for your investments as things can replace very fast in the world of crypto.
Bull Vs. bear market
There are money-making chances in both types of markets – so don’t take out too much on the bear. The important thing to note is that techniques differ significantly for each market. You must know what kind of market you are in so that you know which trading technique to implement.
As with any investment, cryptocurrency investment is forever going to be a risk. To reduce these risks, ensure to perform your homework and never put the money you are not willing to lose.
Digital assets like cryptocurrencies are still in their childhood stages, maturing as we go along. They can be very volatile and not for the faint of heart.
In this arena, knowledge really is power. Doing your own research will help you reduce all the possible risks. Watch videos, read blogs, and join forums – trust us, it helps. And when you finally get the hang of it, you will see that it is pretty beneficial.
Risk-to-reward ratio
Bear markets are the dread of many experienced and new investors since even established assets can lose much of their worth.
Indeed, between the height of the 2017 bull market and the 2018 bear market, the average cryptocurrency lost a gut-wrenching 88.2 percent. And many of these failed to recover their worth in the 2021 bull market. Despite this, for fundamentally and proven powerful assets, investments during a bear market can represent very asymmetric opportunities, where the potential upside dwarfs any possible downside.
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