Bull vs. Bear Crypto Market: What’s the Difference and How to Handle Both

The cryptocurrency market has become very popular for investors and traders. There are often better days and bad days in the market. This is where the terms bull and bear market come in. The bull and bear markets are used to explain the decline and the rise of the crypto market in terms of price and value.

They are general terms that help you as a trader to understand where the market is trending at the moment. This will ultimately enable you to decide whether to sell or buy. In this article, we look at the broad knowledge of what is a bull run in crypto and how it differs from the bear market.

What Are Cryptocurrencies?

Before getting into a discussion about bull runs and bear markets, it helps to give a simple explanation of what crypto is in the first place. Cryptocurrencies are digital assets created and supported by a digital technology known as the blockchain. 

They represent the value that holders consider as a means of payment. They are made using computer software that can secure trading and ownership.

One of the ways cryptocurrencies are created is mining, where miners solve complex solutions and get rewarded with a portion of the crypto they have mined. The single units of cryptocurrencies are known as tokens or coins. Some are units of exchange for goods and services, while others are a store of value.

However, most of them are designed to assist the computer network in carrying out complex financial transactions. While currencies like bitcoin use the mining method, other currencies use a significantly lighter environment, and hence their creation and distribution are much faster.

But many people prefer buying crypto from exchanges like Binance and Coinbase or peer-to-peer. Very few do the mining since it is a job that requires a lot of computer power and energy as well. Either way, in recent years crypto assets have become a target for investors who want to earn returns through capital appreciation.

How Are Cryptocurrencies Traded?

Cryptocurrencies are actively traded with two goals: making a profit or accumulating more crypto in your portfolio. Many investors trade crypto because of its volatile nature.

If the entry is correct, the crypto market can give you returns on your investment to more than 200%. But how to trade remains quite literally the million-dollar question to some investors. However, these steps will help you trade cryptocurrencies with ease.

1. Open an account with a cryptocurrency brokerage firm. There are several that you can choose from, among them being Coinbase, eToro, and Gemini.
2. Next, you have to fund your account with crypto that you intend to trade. Most of the brokers offer a bank funding method through debit cards or wire transfer, but money will reach your account in crypto form (stablecoins)
3. You can trade the stablecoin and exchange it to the crypto you want to invest in. This includes, for example, Bitcoin, Ethereum, or the smaller Altcoins.
4. You have to choose a strategy that better suits you during trading. However, if you are new to trading, you may want to consider a crypto trading course to help you better understand how to trade your investment to profit.
5. Automated trading is also an excellent option to help you earn profit while you receive training. The bots provide conservative, neutral, and aggressive methods to make you money quickly.

The Crypto Markets and Their Features

The question, what is a bull run in crypto cannot be answered adequately if we do not understand the markets. Cryptocurrencies are purely digital and only exist within the code of a blockchain.

Many people believe that cryptocurrencies are tradeable similar to the way stocks, commodities, and securities are. While there are some similarities there, the blockchain remains the fundamental difference between crypto and traditional assets like stocks, bonds, etc.

The crypto market is the general term that is used to describe the overall dynamics of trading cryptocurrencies. However, it has some features that make it unique from other tradable markets. Some of the key features include.

1. The crypto market is very secure. The cryptocurrencies provide a store of value in virtual wallets, which offer increased encryption technology for security.
2. The market also has an anonymity feature where the transactions are attached to a random sequence of characters and not the owner’s identity. Therefore, it is typically not possible to link contracts with people or companies.
3. The market has no intermediaries. This means that the owner of the crypto is solely in control of the cryptocurrencies. This means that some of the limitations found in the traditional market are not often an issue within the crypto market.
4. The method of sending cryptocurrencies is also different from the traditional market. The cryptocurrency transfers are independent of the user’s location, unlike the conventional market.
5. The transactions in crypto are also irreversible. You see, institutional bodies efficiently supervise traditional markets, and if errors occur, they can correct them. With cryptocurrencies, once the error has taken place, it cannot be reversed because of anonymity.
6. The crypto market is developing so fast. Crypto owners can convert and exchange their crypto from fiat money quickly through the various crypto exchanges out there.

How to Buy and Sell Crypto

Cryptocurrencies are naturally appealing to investors due to the prospect of the heavy returns they offer. Their volatile nature continues to provide a lot of opportunities for those looking to trade on the price movements. However, should you decide to buy crypto or sell the ones you have, these simple steps will help you. 

a) Open an account with a crypto exchange like Binance, Coinbase, and others. All you need is an active email address and personal identification documents, which you have to verify using the Know Your Customer (KYC) feature on the exchange.

b) You need to own a personal crypto wallet where you will keep your crypto. Ensure that your wallet is connected to your exchange for your transfer to be complete

c) On the exchange, navigate to the peer-to-peer section, where you will find willing buyers and sellers of crypto. Buy from them your desired crypto, which will then be credited to your internal wallet in the exchange.

d) Transfer your crypto to a crypto wallet installed on your browser or hardware. Make sure that the private key to your wallet is kept safe.

To sell your crypto, transfer the amount of crypto you want to sell from your wallet to the crypto exchange, then sell it on the p2p feature and agree on how you will receive the cash.

Bull vs. Bear Markets in Crypto: What Are They?

Bull and bear markets are crypto terms used to describe how the crypto market is performing and whether they are appreciating or depreciating. The crypto market is generally volatile and fluctuates every day.

The rising market is referred to as the bull market and when the market is falling, it can be described as a bear market. But it’s not as simple as that. Just because the market has added a few dollars into its value does not necessarily make it a bull market.

Certain conditions must be achieved consistently for a market to be categorized as bull or bear. We will discuss some of these conditions in detail below. So how do these terms define the market, and how can we apply them to the crypto market.

Investors who begin buying crypto at low prices initiate a crypto bull market when they feel that the market will start rising and may continue in an extended period. The investors are very optimistic about the return on investment.

On the other hand, the crypto bear market shows the markets falling in value by about 20% and continuing. During the bear market, the economy is so slow, with high rates of unemployment sometimes arising from poor economic policies.

The bear market also lacks the optimistic nature of investors who, in the long run, begin withdrawing their investments from the need to avoid accruing more losses.

Characteristics of Bull and Bear Markets

As noted above, certain conditions need to be met for us to describe a market either as bull or bear. The bull and bear markets have different characteristics that define them. The characteristics of a bull crypto market include the following:

a) The increase of prices in a short time.

b) Soaring demand amidst weak supply

c) Increased investors’ confidence in the market

d) It also causes the overpricing of particular projects.

e) The rise of prices when good news comes in

f) A slight drop in prices when bad news hits the market.

The bear market on the other hand also has its features. It is caused by a few prevalent factors, like negative sentiment, low trading volume, etc. However, the significant characteristics that define a bear market in play include the following:

a) There is always a decrease in price for a sustained period.

b) There is also a lack of investor confidence in the market

c) There are negative comments on the crypto market or the crypto in the mainstream media.

d) The overall distrust in the crypto market tends to be very high.

What Causes Bear and Bull Markets in Crypto?

There are general factors that trigger both the crypto bull and bear markets. Many investors prefer the bull because they foresee profiting in the long run. Investors are the drivers of the bull market. The more capital comes in, the higher the prices will go.

Factors that cause the bull market in crypto can be similar to those in the traditional market. This includes things like improved GDP, a better monetary policy like low-interest rates, and others. In general, anything that causes an increase in investor confidence will more likely trigger a bull run. Here are some examples of factors that will deliver a bull run.

a) The mainstream coverage of the crypto market by media.

b) Introducing institutional capital. For instance, the MicroStrategy

c) Increased risk in traditional assets like equities may push people and capital towards crypto.

d) The special events that show traditional finance is dying, like the Covid-19 pandemic can also play a role.

On the other hand, the bear market will start to show as investors lose the confidence they had when buying. This means that they will start to pull out capital by liquidating positions. This is often referred to as a “sell-off”. Some of the main causes of a bear market are.

a) Negative changes in economic and monetary policy.

b) Comments demonizing cryptocurrencies and the crypto market in general

c) The intervention by regulatory authorities who seek greater control on the market.

d) Geopolitical events like the threat of war and tensions

How to Trade in the Bull Market

The bull market represents a very healthy market. It’s the occurrence of a financial market when a setup is in an upward movement over a long period. In trading, the bull market represents market prices with higher highs and lower lows.

To successfully trade a bull market, you need to understand the market price movements. The market follows an upwards trending move. The traders enter buy positions which are termed as a speculative position for an ongoing rise.

Traders use leverage during trading, meaning that they just commit an initial deposit known as a margin to get exposure in return for an increase in profit or losses. There are several methods that a trader can deploy during bull markets to get profits.

1. A trader can buy early in the bull run. On the analysis of the price action, a trader may enter a buy position, with expected continuity in the upward trend.
2. If the trend takes a pullback in the opposite direction, ensure that you don’t sit on losses for long. You can opt to sell short and then continue buying.
3. Always take profit at different levels. This will help grow your profit and also help determine whether to continue buying.
4. Make sure you follow the market momentum. Despite the prolonged increase in price, markets still have pullbacks that help the long bull run go on successfully. You must analyze carefully before you start trading.

How to Trade In the Bear Market

Trading a bear market is quite the opposite. The bear markets represent a decline in asset prices mainly triggered by economic conditions and uncertainties of the market from the investor.

When trading the bear market, supply and demand are highly involved. The bear market only shows that the supply is plentiful, and thus, the price goes down. How then do you trade a bear market? Well, you require strategies that will help you be successful and navigate well in the long run. here are the tips:

1. Take short-selling positions. In most cases, the trend is always on your side. However, you need to follow the directional momentum in the bear market. Be extra careful not to change if at all a pullback will occur.
2. You also need to find a good entry position. The best entry position is after the market has dipped down 20%. It’s not easy to know how far it will dip of course. But the best option is to take a short position when there is at least a 20% drop.
3. While you take the short positions, take your profit at intervals. Probably take at the previous support level if possible. You could lock in a substantial amount of profit.
4. Just like in trading a bull market, you need to set a stop loss – an instruction to help you when the market price rides on a pullback.

What Are the Risks Involved in Trading Bear and Bull Markets?

Like any other market, the crypto bear and bull markets have risks during trading. However, investing in the bear market has more risks because the prices keep lowering, and investors have almost zero confidence in the market. However, the danger comes with potentially high returns.

In most cases, the risks in a bear or bull market are almost similar to the factors that cause one to happen. How should you protect yourself from such risks before they plunge you into losses?

According to history, the quest for a perfect hedge may be a wild goose chase because of the high cost of the strategies that protect against the downside risk. So, here is what you do.

1. You have to think structurally. It will help you know the amount of risk you can take at any given time.
2. Ensure you plan strategically. Most especially when managing the capital you need to trade. As a rule, put more money in trades that you are sure about and less money on those that you are 50-50
3. You must consider hedging because many strategies can take you to the downside exposure. Be systematic in your trading and view hedging positions that will protect you well from the downside risks.
4. Bear markets are painful. Therefore, you need to manage your emotions. Stick to your trading plan and execute it to the end.

How Long Does a Bear Market and a Bull Market Last?

Both bear and bull markets have a duration of time that they exist. However, it is not easy to say for sure how long they will last. 

However, as a trader, you can compare previous bear and bull markets to see when the market reversed the trend. In most cases, trend reversals happen when an asset declines or rises to a certain price.

Averagely the length of a bear market is about 289 days or nine and half months. This is significant because it’s shorter than the average bull market length, which takes about 991 days or almost three years.

This means that the bear market emerges every three and half years, and vice versa is true. However, the bull market is considered longer than the average in most cases.

Examples of Bull and Bear Run in Crypto Over the Years

The cryptocurrency industry has been in play since 2009 when Bitcoin was initiated, and the market began picking. Since then, there have been ups and downs.

The crypto bull run takes place every four years. The relationship between supply and demand is the primary factor that influences the price in the cryptocurrency industry. 

Some of the bull runs that have been seen in the crypto industry are the 2012 bull run, which was followed by a bearish market that lasted for about two years.

The 2016 bull run is probably the most extended bullish trend in the history of the crypto industry which lasted for a few years till 2018. Another bull run followed the short bearish run in 2021.

The most significant bull run in the future is going to push prices to the top, making investors and traders considerable money. But before that, we expect some bearish sentiment. Is 2022 the beginning of the bearish move, and how long will it take before the important bull run? We will have to wait and see.

Conclusion

The bull and bear crypto markets have many attributes that define them. It is important to always have a clear mind of how these markets play out and what you can do to profit.

Nonetheless, it is helpful to keep observing the market’s past patterns to help us predict future trends and even better strategies when trading. You can also make it a habit to update yourself on the current crypto news and learn from experts and analysts just to be ready.

In general, whether you make your investment during a bull market or bear market, risks will always be there no matter what strategy you use.

* We hope this information will help you in your investment process, but this is not investment advice. Every investment carries risk, especially in this industry, so DYOR before making a decision.