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Written by Robert Steinadler 16 days ago

What are bull and bear markets in crypto?

The bull and the bear are two symbols that are also well known in the stock market. Both describe one of three trends that can be spotted in every market. The bull symbolizes the strong uptrend and optimism among investors. The bear on the other hand quite the opposite.

If you are invested in cryptocurrencies or stocks, you surely came across both terms. But what is the meaning of all this? Where does the idea come from to attribute market sentiment to these specific animals? In this article, we are going to explain the two archetypes that are often used to describe sentiment or market conditions.

What is the meaning of bull and bear market?

As pointed out above both terms are being used in traditional markets as well as in the crypto market to describe a trend:

  • Bull markets are driven by optimism and prices are rising
  • Bear markets are driven by pessimism and the prices are falling

Since crypto traders are operating in a very similar environment as traders in the stock or the forex market, they simply adopted both terms. Another way to describe both trends is the French words Baisse and Hausse, with the former describing a bear market and the latter a bull market. The connection between the words and the trends is more obvious. Baisse simply means “decrease” and Hausse means “rise”.

What is a bull market?

Things are not so obvious when we look into the term bull market. The bull stands for optimism and symbolizes the strength and the power of a strong uptrend conquering one higher price level after another. The bull attacks with his horns by lowering his neck and tackling his opponent. Once he struck him, he quickly lifts his head in an upward move to mangle his opponent with his horns.

This represents what a bull market is all about. Buyers act fearless and pay no attention to the possibility that the price could drop. They attack just like the bull and expand price levels by continuously buying at higher prices, hence the term bull market.

You can easily identify whether you are in a bull market or not by the significant uptrend. Generally speaking, the whole market is up and many rallies seem to be completely irrational and see little or no correction. These situations are also known as bull run.

What is a bear market?

The bear is a strong animal that attacks from above raising its paws that come smashing down on its opponent. Therefore, it became the symbol for strong downtrends that continue with sell-offs reaching new lows with each price move.

Market participants are driven by pessimism during a bear market and are expecting the price to fall even lower. Bear markets are often carried by negative events which have a huge impact on investors’ expectations. War or any other conflict is a typical event that can lead to a bear market in stocks. With crypto, it is slightly different.

While events that impact the non-crypto economy can possibly have an effect on the crypto market, there are also types of events that only occur in crypto. Such as a vulnerability in a protocol or a regulatory approach that isn’t favorable to the technology. These things can create huge sell-offs and a bearish environment.

Market cycles are dominant in crypto

The crypto market is tied to the fate of Bitcoin which serves the role of the anchor currency for this specific market. Of course, we cannot expect that past events will repeat or guarantee any outcome but so far it seems that Bitcoin is following a game plan.

Market cycles in crypto are either following a strong bullish or bearish trend and in both cases come with high volatility. There is a strong correlation between the Bitcoin halving and these cycles. While each halving has been followed by a bull market so far, a strong bear market has been the result after each new all-time high.

This can be easily spotted in the charts. An all-time high of $1.300 in 2013 was followed by a bear market in 2014 and 2015. In 2016 there was the next halving and the market went full bull in 2017 with a peak at $20.000. Both 2018 and 2019 became a long bear market. And as most of our readers may know, after the halving in 2020 the market went wild in 2021. Only time will tell if this is going to repeat and if we are going to see a bear market in 2022 and 2023 and another bull market after the halving in 2024.

FAQ bull and bear markets in crypto

What is meant by the term “crab market”?

The crab can only move sideways and symbolizes a situation when the market is ranging for a longer period of time. Hence the name crab market.

What is the crypto winter?

Crypto winter is a term that was used to describe the situation during the bear market of 2018 and 2019. High hopes of investors were disappointed time and time again until the market was almost freezing on low liquidity and volume finally finding its bottom. The term is still in use to describe a situation where investors expect the crypto market to go through very difficult times.

How can I time bear and bull markets?

The answer to this question is that statistically, most people fail to time the market. A rally can last longer than expected in a bull market and it is the same with the continuation of a sell-off in a bear market. Most retail investors circumvent this problem by making use of the dollar cost average strategy (DCA). Instead of trying to catch the bottom or the peak of a trend they buy or sell assets at a predetermined point in time.

What are perma bulls and perma bears?

Both terms refer to a mindset and personality type of an investor. Some are generally more optimistic in life while others tend to have a pessimistic personality. This often results in a permanent bullish or bearish stance towards an asset or a market.

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