Define

A market with sustained growth is called a bull market. A market that experiences continuous declines is a bear market. Each type of market has its own opportunities and risks.

Whether you are investing in cryptocurrency, stocks, real estate or any other asset, you will often see the market described in one of two ways: bull market or bear market. Simply put, a bull market is a market that is rising, while a bear market is a market that is falling. Because markets often have daily (or even minute-to-minute) fluctuations, both of these terms are often reserved for:

– Prolonged period of increase or decrease

– Significant increase or decrease in volatility (20% is a widely accepted figure)

So, what is a bull market?

A bull market, or bull run, is defined as a period of time when the majority of investors are buying, demand exceeds supply, market confidence is high, and prices are rising. If in a given market you see prices rapidly rising, this could be a sign that the majority of investors are becoming optimistic about further price increases, and perhaps a bull market is starting. head.

Investors who believe that prices will increase over time are called “bulls.” As investor confidence increases, a positive feedback loop emerges, attracting more investments, causing prices to continue to rise.

Because the price of a given cryptocurrency is significantly influenced by public confidence in that asset, some investors use a strategy of trying to determine the level of investor optimism in the future. a given market (called “market sentiment”).

What marks the end of the bull market?

Even in a bull market, there will still be fluctuations, price declines, and corrections along the way. It can be easy to misinterpret short-term bearish price movements as the end of the bull market. That's why it's important to look at any potential signs for a trend reversal from a broader perspective, looking at price action over a longer time frame. (Shorter time frame investors often talk about “buying the dip.”)

History has proven that bull markets don't last forever, and at some point investor confidence will begin to wane – this can be triggered by anything from bad news. as bad as the COVID-19 pandemic. A sharp drop in price can start a bear market, where more and more investors believe prices will continue to fall, causing a downward spiral as they sell to prevent further losses.

What is a bear market?

A bear market is defined as a period of oversupply, pessimism, and falling prices. Therefore, pessimistic investors who believe that prices will continue to decline are called “bears”. Bear markets can be difficult to trade – especially for inexperienced traders.

Predicting when the bear market may end and when prices have bottomed out is extremely difficult because the recovery process is often slow and unpredictable, and can be influenced by many external factors such as economic growth, investor sentiment and world news or events.

But they can also provide opportunities. After all, if your investment strategy is long-term, buying during a bear market can pay off when the cycle reverses. Investors with short-term strategies can also watch for temporary price spikes or corrections. And for more advanced investors, there are strategies like short selling, which is a way of betting that an asset will fall in price. Another strategy that many cryptocurrency investors use is price averaging, where you will invest a fixed amount (such as $50) every week or month, regardless of whether the asset goes up or down. This spreads your risk and allows you to invest in both bull and bear markets.

Where do these terms “bull” and “bear” come from, anyway?

Like many other financial terms, their origins are unclear. But most people believe they originate from the way each animal attacks: cows thrust their horns up, while bears swipe their claws down. Of course, there is a long history of theory and evidence surrounding the origins of these terms. If you're curious, Merriam-Webster's explanation is worth checking out.

Source: Coinbase