Definition

A bull market is generally a good thing that signifies a rapid & significant upward trend of the market. A bear market is the opposite, referring to falling prices & a downwards trend.

Understanding Bull/Bear Markets

Bull and bear markets are terms borrowed from the stock market, but they are widely used in cryptocurrency.

A bull market, or ‘bull run’, is a period of time where:

• The majority of people are buying and not selling
• Demand outweighs supply
• Market confidence is high
• The prices of assets are rising

A bear market is where:

• Market confidence declines
• People begin selling their assets due to widespread pessimism
• A prolonged period of depressed asset prices ensues due to fear and people rushing to cut their losses

If you’re ‘bullish’ on a market or an asset you think the prices will rise, and if you’re ‘bearish’ you think the market is headed for a crash.

Crypto Bull & Bear Markets

In the world of crypto, an asset’s price (and bull and bear markets in general) are  strongly influenced by speculative interest and public confidence. This results in a volatile market which hinges on what is known as ‘market sentiment’ (the overall attitude of investors).

Market sentiment (and thus bull/bear markets) is heavily influenced by:

• News announcements
• Mainstream/institutional adoption
• Media coverage
• Supply compared to the demand of Bitcoin & other cryptos
• Where we are in relation to the previous bull run
• Notable events (technology or regulatory updates, security breaches, economic setbacks, celebrity endorsement, etc.)

Previous Bull/Bear runs

Over the last decade, crypto bull/bear runs have followed fairly predictable patterns that have tended to repeat themselves every 4 years, with each bull run being substantially bigger than the last. 

This allows traders to be able to time the opportune moment to enter the market (just before the bull run begins), however, knowing when and how the bull run will end is far more difficult and there is evidence to suggest that the bull run of 2021 is different than previous ones for a number of reasons.

Key Takeaways

• A bull market is when the market is going up. Getting into a bull market early & selling when you think prices peak is a good strategy.
• A bear market is when the market is going down, but when prices drop you may be able to pick up some solid assets at a low price.
• The term bull market is used in the stock market, but it can be used in any financial market, including Forex, bonds, commodities, real estate, & cryptocurrency.
• Investors who believe that prices will increase over time are known as ‘bulls’.
• As confidence rises in a bull market, a positive feedback loop emerges, which tends to result in further investment, causing prices to rise even higher.
• Bull and bear markets can last any amount of time from weeks to years to decades.
• It can be hard to identify a bull market as prices do not exclusively increase, even when the long-term trend is positive. Dips are to be expected.

How to take advantage of a bull run?

When prices are going up, going ‘long’ and buying the inevitable dips and corrections can be a solid strategy. If you are in a long-term bull market, dollar-cost averaging (regularly investing small amounts to distribute your risk throughout bear & bull markets) can also be effective.

Even if you’re a beginner there are ample opportunities during a crypto bull run, with many low-cap altcoins offering the potential for 10-1000X gains in a very short period of time. However, it must be said that while crypto bull runs are notorious for truly life-changing gains, in the past we have seen bull runs come crashing down in a matter of weeks. While upwards trends can look as if they’ll go on forever, eventually, all bull runs come to an end.

Multi-year bull markets can be destroyed in a matter of weeks (as we saw with the COVID-19 stock market crash) and you should be taking profits along the way and looking to exit many of your positions before the trend reverses and the market comes back down to earth.

If you’re new to crypto, check out our article on the 12 beginner crypto mistakes to avoid! 

How to take advantage of a crypto bear market?

So, the high is over and the market has come crashing back down along with any investments you did not cash out on when things were golden. While many crypto investors are diehard HODLers and couldn’t care less about short term market crashes and spikes, riding the bull run all the way up just to ride it all the way back down can be a painful experience.

Despite this being a nerve-racking time to invest in anything, a bear market (especially in crypto) offers the opportunity to amass some valuable assets while the prices are dirt cheap.

Every time Bitcoin has crashed it has risen up once again to even greater heights. Historically, those who have chosen to buy up during a crypto bear market are laughing. As Warren Buffet says, ‘Be fearful when others are greedy, and greedy when others are fearful’.

How to profit from short selling in a bear market?

Taking a short position, ‘shorting’, or ‘going short’ on a trade is a more advanced strategy where you borrow shares/crypto and sell them in anticipation that the price of that asset will fall soon. If the price does drop, you buy that same asset back at a lower price to cover the amount you borrowed while keeping the profit you made for yourself.

Note: This kind of trading should only be done by experienced traders with a high risk tolerance – as always, never trade with any amount that you can’t afford to lose!

How does the crypto market work?

Cryptocurrency markets can be extremely lucrative but they are undoubtedly more volatile than the tradition stock market.

In greatly simplified terms, crypto markets (and their bear and bull run cycles) move according to market sentiment, speculative interest and various factors which include:

• Previous market cycles: Previous bull/bear runs often have a lot to say about how the current market will behave.
• Press: The way the cryptocurrency is portrayed in the media and how much coverage it is getting.
• Mainstream adoption: The extent to which the cryptocurrency fills the market’s demands and how well it integrates into existing infrastructure such as e-commerce payment systems.
• Notable events: Major events such as regulatory updates, company announcements, celebrity or institutional adoption, security breaches and economic setbacks.
• Supply: The total number of coins and the rate at which they are released, destroyed or lost.
• Market capitalisation: the total value of all the coins in existence and how users perceive the coin to be developing.

When will the crypto bull run end?

The question everyone is asking: When will the bull market end?

While crypto bull runs historically have followed cyclical patterns that give plenty of insight to what will happen in the current bull run, there is a lot of evidence to suggest that the 2021 bull run will be different than previous bull runs.

The socio-economic climate is different, market sentiment has progressed in a very big way for cryptocurrency and we are seeing mainstream/institutional adoption like never before.

In reality, no-one really knows when the bull run will end – which is why we advocate taking some profits from your gains as the market and your portfolio goes up, while reducing some of your positions (especially in less proven coins) when you think the end of the bull run is approaching.

Whether that means moving your holdings to Bitcoin, a stable coin, precious metals or good old-fashioned cash, one thing is clear: Many altcoins that went up during the bull run will come crashing back down when it’s over.

Lots of altcoins will be overvalued towards the end of the bull run so it’s worth having some trading goals and an exit strategy for your investments as things can change very quickly in the world of crypto.

What marks the end of a bull market?

Another difficult question due to the fact that even during the strongest bull markets there will be many fluctuations, dips, and corrections along the way. People often misconstrue short-term downward movements as the end of a bull market when really things are just kicking into gear.

This is why it’s crucial to stay vigilant for any potential signs for a trend reversal from a broader perspective, looking at price action over both short and long-time frames, and making sure you have a wide range of trustworthy sources.

Why a bear market and a major crash is not the end of the world

Bitcoin crashes. And then all the sceptics say, ‘I told you so’. And then a few months pass and it recovers, bigger and stronger than ever. Every. Single. Time.

Bitcoin is king in the world of crypto and its price has a big impact on the entire market and the price of all the other cryptocurrencies. And it seems to always bounce back. While holding a crashing coin can be hard to watch, many of the stabler crypto coins (Bitcoin in particular) have seen many crashes that have been followed by a swift recovery that has taken it to new heights.

Now we can’t say whether this will happen forever, but Bitcoin has recovered from every crash it has had and it is important to remember that in crypto, you only lose when you sell. If you have faith in the value of your investment, holding through a tumbling market may be your best strategy – especially given that the crypto revolution is still in its early days. 

You can never be sure when a coin or the market has reached its peak or its bottom. Being able to predict these movements is the art of crypto trading. Doing your research and performing a fundamental and technical analysis will increase the likelihood that you can predict future market trends accurately and make the most of whatever state the market is in.

Where did the terms ‘bull’ and ‘bear’ come from?

You can find some theories behind the origins of these terms here. But we like to keep it simple. A bull thrusts its horns upwards, and a bear swipes its paws downwards. Hopefully that’s enough for you not to forget which is which.

Understanding Bitcoin halvings and crypto bull runs

Once every four years there is an event that has an enormous impact on the crypto market. It is the halving of the Bitcoin supply (the amount of BTC miners receive for their efforts in keeping the Bitcoin network secure). As you can imagine this has a dramatic impact as the supply is severely and abruptly lessened, and if the demand for BTC remains or grows (which historically it has) then the value of Bitcoin shoots upwards.

Reliably, after every halving of Bitcoin a massive crypto bull run has followed (plus an altseason!), with this trend playing out fairly predictably over the last 4 years. One of the most advantageous things about trading crypto is that based upon historic patterns and the 4-year cycle, you can accurately estimate the best time to enter the market (ideally when the next bull run is just around the corner.

What have past crypto bull runs taught us?

Following historic trends based on the 4-year cycle, past crypto bull runs have often begun a few months after a Bitcoin halving. On top of that, another consistent pattern throughout the lifespan of Bitcoin is that each bull run is substantially bigger than the last with the peak of the bull run outperforming the previous peak by a huge margin.

In the epic bull run of 2017, we saw that this pattern did not only apply to Bitcoin. The entire cryptocurrency market as a whole hit new all-time highs, with market cap of altcoins reaching over 1.5 trillion.

This is another trend that we can fairly reliably predict of future bull runs. In fact, the current bull run we are in seems to be confirming this pattern and we are likely to see many altcoins absolutely smash through their all-time highs of the previous bull run, as they have done many times before. 

Is this bull run any different to previous bull runs?

Much of the analysis of crypto bull and bear markets are based on previous bull markets and historic patterns repeating themselves. In many cases, using historical data, some traders have been able to predict major market movements within weeks or even days. However, there is solid evidence to suggest that this 2021 bull run is different. In a big way.

Few predicted just how big Bitcoin and crypto would get and we are now seeing mainstream and institutional adoption and investment like never before. Governments, banks and some of the biggest names in the world (Tesla, IBM, Microsoft, etc.) are investing heavily in Blockchain, Bitcoin and other cryptocurrencies, and it seems we are approaching a real turning point for mainstream crypto adoption. On top of that, the space is far more mature than it was 4 years ago and there are a number of crypto projects which are well established and ready to provide real utility to the world.

While the past bull run is important to keep in mind, there is a good chance we are entering new territory, making the current and future bull markets more exciting (and harder to predict) than ever before. One thing, however, is certain: The future of crypto is brighter than ever.Here’s to making the most of it!