Are you a beginner-level crypto investor? Have you recently started trading in cryptocurrencies? If so, then you have come to the right place. Anyone can learn about different strategies which the professionals out there use to score big with cryptocurrencies and amass a ton of money in the process of doing so; what does really matter is how to play the game by remaining in your moment and not losing or giving in to your temper.
If you want to learn just that, then you have to consider deeply the impact of the bull and bear market and how you can handle both. The ‘bull’ and ‘bear’ are the terms that are commonly used in the stocks market to determine how the market is performing. It also is a measure of how the market is appreciating and depreciating in value. If the market is rising and the prices are booming, then it is known as a bull market, and if the prices are being slain, then the market is known as the bear market; the same concept can be applied to the crypto market.
But there is a certain twist, the crypto market is more volatile as compared to the stock market and fluctuates more occasionally and in some serious capacity too. You might see a cryptocurrency performing out of the charts and the very next day plummeting to the ground. If you don’t want to lose all of your investment and learn the art of making money in the crypto market, then you have to understand both these concepts and in detail, what causes them, how can you bounce back from each of them, and make a solid come back.
What is a Bull Market?
A bull market generally refers to a more favorable and ascending market in which the prices of various assets are increasing on a consistent basis, and the sentiment of the investors across the board is also extremely positive; this means more business will flow into the crypto market, and there will be more trading in the upcoming days.
Furthermore, it also means that the economy will grow stronger, and the employment level will also increase; this concept is perfectly in balance with both the crypto and traditional markets. The bull market might last only a considerable amount of time in terms of the stocks market, but for the crypto market, it is much stronger and consistent but extremely rare to come by, but when it does, it remains persistent to the very end.
The crypto market enjoys an average of 40% increase in the price of the assets, and it is kind of a usual scenario, whereas the same can’t be applied to other traditional markets, including the forex and stock market. Part of the reason why is because the crypto market is strategically new, and there is still a lot of room for development and an initial boost. When the crypto market is booming, you would see that the sentiment of investors turns extremely positive, and they are optimistic about making the most out of this rising crypto portfolio.
Generally, a bull market starts when investors pour their money into purchasing securities, and this can be done by fiat currency; when the price of securities rises, the bullish trends start to become more prominent on the crypto horizon. It would remain bullish for some time, and when the whole thing gets a little dull, the market would once again take a shift and turn back to a bear market.
How Does a Bull Market Happen?
It has been mentioned before that these are investors who really start a bull market; the initial thought of the investors with a bull market is that when the price of certain cryptocurrencies or assets continues to rise, they have a feeling that these will continue to do so for an extensive period of time, so they start buying those assets. Not only this, but they have to remain optimistic for the return on investment because if they don’t, then what good is their faith in initiating a bull market, investors pour their money, and they remain patient until the very end.
Other factors are also present which play their own part in initiating a bull market. The GDP or gross domestic product has to be pretty strong for a country or an economy to get involved in a long-term bullish market; furthermore, the unemployment factor should be minimal as well. A crypto bull market is also influenced by the same factors as a traditional market does. Another playoff with the crypto market is that it is still basically very new; that is why it has only a bunch of investors who have faith in its dealings.
This might influence the market on a more potential level, and the crypto market might have its own factors that are unique to its very niche. Some of the factors that might tempt a bull market could include support from the mainstream media and pop culture. There is much evidence present in this regard as Elon Musk is considered to be a potential influencer of the crypto market and cryptocurrencies; he was seen initially supporting Bitcoin but then he kind of cut his ties with the flagship cryptocurrency and could now be seen supporting Dogecoin on every possible forum.
Other factors include the introduction of the institutional capital, MicroStrategy, a business intelligence firm that has a reputation within the crypto market for buying each and every Bitcoin dip dating back many years. Traditional finance such as banks and enterprises are finally coming around the concept of cryptocurrencies and blockchain technology, and that is another push towards initiating a bull market. COVID-19 has been a driving force tempting people to adopt online services and push away from Fiat currency and physical entanglement to products and services; this is another factor that adds to the popularity of cryptocurrency and thus helps in initiating a strong bullish market.
Understanding Crypto Bull Market
To be able to better understand the prospects of a bull market and how long it would sustain, there are certain characteristics that need to be brought into consideration, such as when some of the assets are showing an increase over their prices for a consistent period of time then it might be the indication of a bull market approaches.
At the same time, if the supply of an asset is weaker than its demand, then know that a bull market is in effect. Increased interest from the investors and the overall sentiment as well as confidence they are pouring into the market, overpricing of dedicated projects within the crypto industry, and the mainstream media influencing certain cryptocurrencies are all indications of a strong bull market showing that is at a moment’s notice away.
On the other hand, a general interest in cryptocurrencies among celebrities, influencers, and various other sectors also indicate that a strong bullish run is in effect also when prices start to drop when there is generally bad news circulating the crypto market then it might also represent the possibility of a sudden increase in crypto action and therefore a sustained bull market.
What is a Bear Market?
A bear market is associated with a sudden decrease in the price of an asset for a consistent period of time. For stocks and other commodities, the minimal range for the drop and the price of these assets might continue to fluctuate, but for the crypto market, it is rigid at 20%. It means that if a fall of at least 20% or more than that is witnessed among the price of certain cryptocurrencies or assets across the board, then it technically means that a bear market is going to be in effect.
There have been multiple crashes within the crypto market and more severe ones as 2017 saw the decline of Bitcoin from $20K all the way to $3.2K, now it took place in a matter of days, and investors along with the crypto market were not given any time to recover from it. One might argue that the bear market has been a more consistent and inevitable occurrence for the crypto market because of just how volatile the market itself is.
One can’t be subject to the fact that there is a dedicated bear market unless there has been at least a 20% decline in prices and the prices are dropping consistently; only then can a period be subjected to a bear instance. There are multiple effects of the bear market not only onto the market itself, whether it is stocks, forex, or crypto but the morale of the investors also gets pretty shaken up. They suddenly lose their interest in pouring more money into a dedicated market during the time it is depicted as a bear because they don’t want their investment to fall or fade from the face of the earth.
This is just an aftermath of a bear market that the economy, the market as well as the investors have to accept and move on with it. Remember bear market, just like a bullish market, is only for a dedicated period of time, and when that is over, and the money is better, and the economy is rising, the whole thing is going to change. A bear market is going to be replaced with a bullish market and vice versa.
Apart from all that, poor economic policies, geopolitical crisis, and market bubbles which arise from people making bad investment decisions and products that are more liable and perceptible to plummet gives rise to unemployment and makes trading drastically slow; in all these situations, the market is always going to be bearish. But it is not as bad as it sounds, because this is only for a considerable amount of time and it will pass.
Here investors that are termed as whales, because of the volume of money they are able to pour into the market, will start buying assets that are down and beaten heavily by the bearish onset of the market. This way, they will be putting away their money into a low purchase asset accumulation which is going to turn them a huge profit when the market shifts and is once again a bullish one.
There is a key moment after which the price of a dedicated cryptocurrency or multiple ones would start to crumble, and that usually comes down to receiving bad news regarding a dedicated stock or cryptocurrency performing badly. Now just how important that stock or cryptocurrency is will affect the onset of the bearish market and the overall effect that it will have on people and investors.
At the end of the day, it is a game of patience and logic; you have to be careful and in charge of your wits, or you are going to lose everything. People are seeing selling mounts and mounts of their holdings just because the asset they have invested in is seeing a bad time; they sell out of panic only to regret their decision later. You don’t want to do that because the cycle is going to repeat itself, and the bearish market is going to turn into a bullish one, and then you would be able to have redemption for the losses that you have sustained during a bullish run.
How Does a Bear Market Happen?
The Rolling Stone for the origin of a bearish market is always the decline in the price of the assets but only when it becomes a consistent downward trend could you get a bearish market. Typically when the price continues to drop, the interest of the investors continues to go thinner and thinner with every passing day up to the moment where they are not interested in doing business with the market for some time and would be waiting for it to cool down.
There are other factors to consider which could prove to be the onset of a bearish market, such as political crisis, economy going down into plummet, pandemics, wars, and even the loss of the interest of the public could be a start of the bearish market.
The very causes for the onset of a bearish market might continue to change with time, and these might be a little too cloudy at times; therefore, there are certain indicators that you should be compensating for to make a forthcoming indication for a crypto bear market approach.
If the overall trading volume has reduced and or shrunk preemptively, then know that a bear market might be in order, the trading volume refers to the overall number of investors that are making trades on a daily basis. If the trading volume is down, then, of course, the market is in a serious plummet, and investors are not yet ready to risk their investment in a bear market. Also, another indicator could be the loss of interest among the financial companies and enterprises that were previously soaring to have their money invested into the crypto market.
Also, if the future price of a dedicated asset becomes lower than the current market price, then know that a bear market is approaching. If there are new policies and taxation laws being developed for the crypto market, then it definitely means that a bear market might be in order. Other than that, the slowing of the mining activity as it happened with China trying to seize all mining operations from its ground led to a catastrophic decline in the mining capacity of Bitcoin, which ultimately led to a market-wide crash; these kinds of indicators usually refer to a bearish market becoming apparent in the coming future.
What to do when the Markets are Shifting
You must be assertive about the fact that both the bear and bull markets affect the crypto market differently than these do with the stocks or the forex markets. Let’s say that a bear market is in order; prices are being slain across the board, all crypto assets are in decline, so it brings forward the attention of the investors to pour their money into the action so they can buy the dip. It is pretty common when a bear market is at its full swing for investors to take advantage of this situation and invest their money into the market.
But soon after, when they have reached a particular point where there is no more use to pour money into the market, they wait for the prices to go up once again and the bear market to begin at the beginning of the market or when it is consistently moving ahead. The same investors who invested their money into the market previously would now be selling their assets and could begin cashing out of there.
That is why it is always best to stay in the middle, don’t invest too much, and don’t sell too early, and that is all to crypto trading and making consistent strides within the crypto market. Just remain intact and wait for an opportunity to strike, and it is a game for those who remain in consistent connection with the market, so make sure that you are never too far away or else you will risk missing a great opportunity passing you by.
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