WHAT IS A BULL MARKET?
A bull market is defined as a condition in a financial market in which prices are rising or are expected to rise. The term “bull market” is most often used to refer to the stock market but can be applied to anything that is traded in an open market, such as bonds, real estate, currencies, cryptos and commodities.
Bull markets in any market is typically characterised by huge optimism, investor confidence and expectations that values of different assets will continue to go up for an extended period of time. So be it bull or bear markets, apart from fundamental factors – there is a big influence of mass psychology and emotions that work behind the scenes.
WHAT CAUSES A BULL MARKET IN CRYPTO?
The causes behind a bull market in crypto can vary from time to time. For example, 2017’s bull run took place during the ICO boom in the crypto market, where everyday there was a new blockchain being launched into the space and people were beginning to know and realise what crypto meant.
2017’s crypto ICO boom also went bust due to a large number of fraudulent projects and exit scams that were released that dampened investor confidence. That led to a huge loss in value in the crypto market.
More recently, 2021’s crypto rally can be said to have occurred indirectly due to the Covid-19 pandemic that raged across the world. Covid-19 induced lockdowns had forced governments to introduce heavy quantitative easing measures that were naturally bound to bring about inflation into the market. With more free flowing, cheap cash in the market, investors began exhibiting more risk-on behaviour and thus got into cryptos.
Along with that, the flagship crypto – Bitcoin was also being touted as an inflationary hedge, that brought about a lot of investor interest at a time when inflation was expected to go up. And, 2021 also saw major institutional money flowing into all major cryptos, from Bitcoin, Ethereum all the way to the likes of XRP, Solana and many others. Institutional money typically tends to be a large amount and that tends to push prices upwards.
So really, the reason behind a bull or a bear market are varied and happen for different reason at different time periods.
WHAT MARKS THE END OF A BULL MARKET IN CRYPTO?
Well, in general stock market terms, it is widely agreed that a correction of over 20% from local highs in prices of assets typically constitutes the end of a bull market and the beginning of a bear market. But in crypto terms, that metric isn’t really suitable. Crypto, by nature is far more volatile than the normal stock market thanks to the fact that it has a much smaller market cap overall and a lot of big players who can manipulate the market rather easily.
But in our current case right now, almost all experts in the field tend to agree since the beginning of 2022, the overall crypto market has descended into a bear market, ending the bull market spell of 2021.
However, during a bull market there will be fluctuations, dips, and corrections along the way. It can be easy to misinterpret short-term downward movements as the end of a bull market. This is why it’s important to consider any potential signs for a trend reversal from a broader perspective, looking at price action over longer time frames.
Read more: Top Crypto Bear Market Indicators
CHARACTERISTICS OF BULL VS BEAR MARKETS
|BULL MARKETS||BEAR MARKETS|
|Sustained price appreciation over time||Widespread price depreciation in the market|
|High demand, low supply||Low demand, high supply|
|Increasing trading activity across the market||Comparatively lower trading volumes across asset classes|
|Increased investor confidence in the market||Lack of investor confidence in the market|
|Certain (even bad) projects become overpriced||Bad crypto projects are weeded out of the system|
|High social media chatter, lots of excitement about cryptos||General distrust amongst experts and community members|
TOP BULL MARKET INDICATORS IN CRYPTO
The Golden Cross is a situation when the 50-day moving average crosses above the 200-day moving average. This crossover typically represents a long-term momentum change towards the bullish side. From this momentum change, a substantial bullish rally typically occurs.
Therefore, if a golden cross occurs and the 50 day MA is above the 200 day MA, the crypto market can be considered to be bullish.
However, the reverse is true too. If the 50-DMA crosses below the 200-DMA, it indicates a long-term change in trend towards the bearish side. In the chart above, the first circle marked is a bullish golden crossover while the second one, which happened in the beginning of 2022, was a bearish golden crossover.
There are many other indicators that can help you determine if you are in a bear or a bull market, ranging from Glassnode’s RHODL Ratio to Puell Multiple. But those involve complicated calculations and blockchain data while the Golden Cross is something you can easily access and view on the go.
WHAT IS A BULL MARKET IN CRYPTO?
In specific crypto terms, a bull market would typically consist of the following:
1. Mainstream visibility
Crypto bull runs can be said to have resumed when there is mainstream visibility and even pop culture support for the space. For example, in 2017 – crypto was being endorsed by the likes of Paris Hilton and DJ Khaled. Even in 2021, famed rapper Snoop Dogg began picking up BAYC NFTs and buying land in The Sandbox (SAND) metaverse platform. Even Justin Beiber had performed live in the metaverse at one point of time.
2. Institutional Investment
Crypto bull runs can also be supported by major institutions begin investing in crypto, finally seeing its potential. One of the best examples of it can be Michael Saylor’s MicroStrategy which now holds close to 129,699 Bitcoins on its balance sheet. Along with that, a number of spot and futures based ETFs have been launched in the U.S, Canada and several other countries to help smaller retail investors to pool in funds and buy into crypto.
3. Blue Moon Instances
This refers to situations and conditions that put traditional financial instruments and structures under threat and where crypto would be better suited to handle the situation and come out unscathed. One of the recent example is the Covid-19 pandemic that shuttered businesses all across the world leading to a temporary economic shutdown. Even the world’s first crypto, Bitcoin was born out of the 2008 financial crisis and the bursting of the credit bubble.
Also Read: What is Crypto Bear Market?
HOW TO TAKE ADVANTAGE OF BULL MARKETS
1. BUY AND HOLD
Or HODL, in the crypto lingo, Hold On for Dear Life. This could be one of the simples and the easiest strategies to execute during a bull market. Find good crypto projects, try to buy at reasonably good valuations and sit on it. This enables you to ride the bull market and make the most out of it
2. BUY THE DIP
This is another strategy to employ if your portfolio is in loss. If you still have conviction in the projects you have bought into but you are seeing red on your books, buying the dip would be the way to go to reduce your average buying cost of your favourite crypto tokens.
3. SWING TRADING
Perhaps the most aggressive way of attempting to capitalize on a bull market is the process known as full swing trading. Investors utilizing this strategy will take very active roles, using short-selling and other techniques to attempt to squeeze out maximum gains as shifts occur within the context of a larger bull market.
Important Crypto Taxation Guides you should read while taking advantage of Bull Markets
In conclusion, a crypto bull market is a very enthusiastic time for all participants in a market, which includes the crypto market too. There’s a lot of buying activity, lots of innovation happening all across the space and people are enthusiastic. However, a bull market doesn’t last forever and is always inevitable followed by a period of bear market and one must be ready for that.
Where did these “bull” and “bear” terms come from?
The actual origins of these expressions are unclear, but one reason could be that bulls attack by bringing their horns upward, while bears attack by swiping their paws downward.
Is it better to buy in a bull or bear market?
Buying in either bull or bear markets have their own set of risks and rewards. Buying in bear markets give you the opportunity to buy assets at extremely cheap prices thus you stand to make a solid profit when the market recovers but you never know when that might happen. Buying during bull markets ensure a high probability of not getting stuck in a trade because the market is typically rising and you will be able to book profits soon enough.
How to invest in a bull market?
If you're thinking of investing during a bull market, there are a few strategies you can employ. As explained in the article above, you can simply buy and hold, buy the dips and even do full fledged swing trading to make the most out of the bull market.
Are we in a bull market now?
No, we aren't in a bull market anymore. 2021 was marked by an incredible bull market that saw the entire crypto market grow leaps and bounds but ever since the beginning of 2022, there has been a painful slump with no end in sight yet.
What makes prices rise in a bull market?
It is generally a chain reaction of optimistic sentiments, increased buying activity and positive news cycle around the market.