How to Navigate Crypto Bull Markets and Bear Markets
While trading in cryptocurrencies, you have probably come across the terms “bull market” and “bear market.” Whether it is a stock exchange, real estate, or cryptocurrencies, understanding market dynamics is everything. And bull and bear markets play a crucial role in defining the market trend and investor mindset.
Simply speaking, a bull market describes a rising trend and a bear market describes a declining trend. The market trend is hugely influenced by the investor’s mood and perception. This is a phenomenon known as market sentiment.
Due to market sentiment and a number of other factors, the cryptocurrencies fluctuate between bull and bear markets. Both can occur for long-term market movements and short-term market swings. And both can have major impacts on investors and the greater market as a result.
To steady yourself the next time the market swings in one direction or another, arm yourself with key insights. It’s imperative to understand market dynamics when you wish to ride the swells to success. Let’s dive into the details about the economic conditions known as crypto bull markets and crypto bear markets.
What is a crypto bull market?
A bull market, often called a “bull run,” is an optimistic market. It is a period when the demand outweighs the supply. For the crypto market, a bull run on crypto currencies turns them into a desirable and coveted asset.
As a result, during a bull run, crypto prices rise upwards. The market confidence is high and the investors appear optimistic or “bullish”. Essentially, what is a bull run but a major shift in activity that trends toward buying versus selling. It tends to be quick, to be volatile, and to mark an opportunity for major profits.
The investors are referred to here as “bulls.” They believe that the prices are going to go up in the future, and subsequently invest more. This creates a positive trend in the market and as a result, more investors enter the market.
The bull market may not last forever. In any market, there will be short-term fluctuations and dips and the price trends may go down for some time. It is also subject to unforeseen events, government policies, market sentiments, etc.
For example, the market took a sudden hit with the onset of the COVID-19 pandemic and witnessed a sharp downward trend in prices. This can happen when investors lose confidence and, to avoid losses, they start selling their assets. This may result in a fall in the prices.
To leverage the bull market, it is advisable to trade early. At the beginning of a bullish market, there is a rising trend of prices. It is best for traders, especially novice investors, to take advantage of this upward trend. Traders can sell their assets when the prices reach their peak to potentially maximize their profits.
If they notice a bearish trend, it is best to sell off the less-proven cryptocurrencies and leave the market.
Bull market characteristics
The crypto bull market will show some combination of the following characteristics:
Sustainable price increase over a long time
Large trading volumes
Increased demand
Weak supply
Optimistic investors
Sudden demand for crypto investment among big business houses, celebrities, etc.
Small dips in prices
Huge price hikes over good events
High liquidity
As you can see, the crypto bull market is noted in its relative optimism. Signs from the market tend to point upward during this dynamic, and so traders are more likely to engage with the marketplace.
As of this writing (October 2024), the crypto market is in a bull run. But nothing good lasts forever in the marketplace. Inevitably, the market will shift into what is known as a crypto bear market.
What is a crypto bear market?
A crypto bear market is, by definition, the polar opposite to a crypto bull market. In a bear market, there is more supply than demand.
The investor’s confidence is low, and prices start falling. In this scenario, the investors here are pessimists and called “bears”. They believe that the prices will fall further in the long run and start selling their assets to avoid further losses.
A bear market can be challenging, especially for novice traders. The crypto bear market is unpredictable and slow to rebound. It is also difficult to predict when the downward sloping of the prices will end.
External factors like investor’s sentiment, economy, low trading volumes, excessive risks, and unforeseen events aren’t isolated. They can potentially widely influence the cryptocurrency bear market.
A bearish market may be challenging, but there are opportunities where investors can make some profits. A bear market in the long term can reverse itself. So, investors who are looking for long-term profits can wait for price hikes.
Just like the bull market, the cryptocurrency bear market experiences temporary price hikes. This is an excellent opportunity for investors to make some short-term profits.
Many experienced traders bet on cryptocurrencies depending on their price declines. This is known as “short selling.”
Another important strategy is known as “ dollar-cost averaging.” In this dynamic, traders invest a smaller amount of assets periodically (weekly or monthly). The trader bases their transactions on the rise and fall of prices. This helps to distribute risk and avoid big losses over a long time.
In a bearish market, one of the strategies is to buy the assets when the prices are low and wait for some time. Then, investors can sell the assets when they enter into a bull market.
Another strategy is to sell assets when the market indicates a bear trend. Then, the trader can buy back the assets when the prices decline further. This creates an opportunity to earn greater profits in the next bull market.
Bear market characteristics
The crypto bear market will show some combination of the following characteristics:
Low demand
Increased supply
Fall in trading volumes
Lack of investor confidence
Low liquidity
High unemployment rates
High market interest rates
As contrasted with a bull crypto market, a bear market is pocked with a lull in optimism, engagement, and value. But this is where opportunity comes into play.
While the coming of a bear market is inevitable, that doesn’t mean it will last forever. Unfortunately, without a crystal ball, it’s impossible to determine when the next crypto bull market will arise.
Crypto bull versus bear market
The bull market may be favorable, but there are ample opportunities to make profits in a bear market. Investors need to familiarize themselves with the market trends and study the market. Only with the right insights can they adopt strategies to work in both markets. The key is to implement the right strategy.
Unlike stock exchanges and other asset classes, crypto bull and bear markets operate differently.
They are short-lived and more volatile compared to stock markets. The crypto market trend depends largely on the feedback of crypto investors. Times of high yield are often followed by constriction and rebalancing, followed by digital asset value growth. And so on and so forth.
So, a bearish market may recover quickly as it reaches its bottom and enters the bull run. Similarly, a bull crypto market may last only for a few days or a month before it returns to a bearish state. This happens because as the bull market grows, the investors cash out their assets and start selling. This results in a fall in the demand for the assets.
While explosions and contractions happen often when it comes to crypto, they are markedly more dynamic than traditional markets. As such, there’s simply no way to predict when or how a market will react to economic conditions. Instead, it’s simply best to arm yourself with the techniques needed to come out on top of each shift. Study the best practices and tips for trading in crypto bear markets in this article.
Key takeaways and factors to consider before investing in bull and bear markets
Stay above rumors and market news. FUD (fear, uncertainty, and doubt) makes investors suspicious and harms their sentiment. Traders tend to sell their assets from the fear of losing money in the future. FOMO (fear of missing out) is just the opposite of FUD. For FOMO, investors often get carried away with some good news or events and sell their holdings to make huge profits. However, in doing so, they often overlook the current market trend and make trading mistakes as a result.
Diversify your investments. Expand your portfolio. Instead of investing in one particular asset, it is best to consider different cryptocurrencies. Study the market, plan out strategies, and visualize your entry and exit from the market. We can’t tell you which crypto will boom in 2024, but as the rule goes, the more you hold the likelier something will yield a profit.
Hold assets for the long term. The crypto market is volatile, but it has always been favorable to investors who hold assets for long periods.
Leverage the market trends. The crypto market will always fluctuate. A bull market only lasts for a specific period and is followed by a bearish market. Even a bearish market has loops and holes where you can make profits. Investors can make short-term profits through betting, short selling, and staking.
Take hold of your emotions. Crypto markets are likely to fluctuate. Do not let your emotions run your trading.. Instead, it is important to adjust your strategies depending on the market. It will also help to diversify your assets.
Use a tool to stay up to date with your portfolio. It’s impossible to watch the markets 24/7 (when would you sleep?). But there are thankfully tools to help you watch and take action on the crypto bull market or bear market.
A Smarter Way to Monitor and Trade Crypto
When you’re ready to put all these key insights into practice, Cryptohopper is ready to help you take the next step. Our automated trading platform uses AI-supported tools to monitor key factors in the market. Everything from market cap, asset value, and more falls under our tool’s monitoring capabilities.
But it doesn’t stop with monitoring. The Cryptohopper platform can even execute trades on your behalf. This will ensure you don’t miss market shifts when you’re not watching the ticker.
Don’t sleep on the crypto bull market and bear market shifts. Trade smarter. Let a Cryptohopper bot aid your trading strategy.
