Anyone passionate about investing and trading must have often come across the terms “Bull” and “ Bear” market which govern the behavior of the traders and investors quite significantly. Since both the stock and crypto market is volatile and fluctuates on daily basis, therefore a thorough understanding of these terms helps to determine the upward and downward movement of the market based on which crucial decisions are made.
Understanding Bull and Bear Market
A bull market refers to the market situation that is favorable to the economic conditions. As a result, a rising market that is accompanied by positive investor sentiments is said to be “Bull”. In cryptocurrency markets, it is quite common to see strong and consistent bull–run phases. Approximately 40% increase in the value of digital assets in a short period of two or three days is a usual scenario which is a result of a relatively smaller market span in comparison to traditional markets. The bullish market goes on as long as the supply is more than demand and once this phenomenon starts to fade the bull market turns bearish.
Thus, the Bear market is the one where the value of assets (physical and digital ) falls, in the cryptocurrency market this decline can be defined as low as 20%. The popular scenario of December 2017 where Bitcoin’s value dropped from $20,000 to $3,200 is defined as a “Bear” market. During this market condition, the economy is slow-backed with high unemployment rates. However, this is the time when investors and traders prefer buying assets as their value is at rock bottom.
Common Indicators of Bull and Bear Market
Besides the price factor, there is several other parameter or indicators that help to clearly define whether the market is “Bullish” or “Bearish”.
Indicators of Bull Market
- High employment rates
- Growing demands for assets
- Strong GDP / GNP
- Positive market sentiments
Indicators of Bear Market
- High inflation and unemployment rates
- Slow economical growth
- Supply is greater than demand
- Discouraged investors and traders
Bullish Trends in Crypto Ecosystem
Besides, the direct market factors some indirect factors impact the crypto market conditions. Since crypto markets are relatively new on the scene when compared with traditional markets, therefore crypto bulls are easily impacted by indirect factors too. The likes of Paris Hilton, DJ Khaled, and shows such as The Big Bang Theory brought the attention of pop culture into the cryptosphere. Furthermore, the significant investment of corporate institutions such as Microstrategy put digital assets on the Bull Run backed by an unexpected situation like Covid-19 that made digital assets the go-to option for investors and traders.
Bearish Trends in Crypto Ecosystem
A highly volatile crypto ecosystem enters into a Bear market quite easily even with small events like a tweet, or other public statements which are more like an opinion. One such event dates back to the year 2017 when JPMorgan CEO Jamie Dimon termed Bitcoin a fraud. As a result, just in a month, a coin of that value crashed promptly. Furthermore, the changes in the rates of the Federal Reserve change the attitude of the people toward digital assets quite significantly. Alongside, the intervention from regulatory bodies like the Chinese government which laid down restrictions relating to crypto software and mining influenced the behavioral pattern of the enthusiasts across the globe.
Bull v/s Bear Market – Key Differences
Even thought cryptocurrencies are more susceptible to market fluctuations, the nature of the “Bear and Bull” remains similar to that of traditional market. Lets understand how both these market conditions differ from each other.
|Feature||Bull Market||Bear Market|
|Market Scenario||High GDP||Low GDP|
|Impact on Economy||Strong economy – More trading||Weak economy – Less Trading|
|Investor Behavior||High confidence||Low confidence|
|Liquidity||High liquidity||Low liquidity|
|Job Market||Low unemployment rate||High unemployment rate|
|Supply and Demand||High demand , weak supply||Low demand , high supply|
Bull and Bear crypto markets are driven by several direct and indirect factors but behave similarly to the traditional bull and bear market. Thus, one thing that remains common in both forms of market conditions is to keep a watch on market movements to understand the experience the richness of the digital assets. Alongside, a thorough market study also becomes more important here due to the volatile nature of the digital assets which are not regulated.