The Best Ways to Benefit from Cryptocurrency: A Guide to Bull and Bear Runs

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The cryptocurrency market is a volatile space with huge growth potential. The best way to take advantage of this is to understand how cryptocurrencies work, what the different currencies are, and how the market behaves in bull and bear cycles. Since the inception of cryptocurrency, there have been two predominant trends in the market: Bull and Bear markets. While these two volatility cycles do not seem to affect everyone, it is still important to understand what they are and how you can benefit from them.

A Brief History of the Bull and Bear Markets

Although the origins of the terms in financial parlance remain unclear, historical documents generally point to two common interpretations:

  • It is believed that the terms “bear” and “bull” came from how each animal attacked its prey. A bull raises its horns to strike, while a bear charges with a sweeping motion. These behaviors serve as a metaphor for how values change in a bullish (bullish) and bearish (bearish) market.
  • A different hypothesis is founded on the bear skin trade tradition from the 18th century. Middlemen overcharge customers for bear hides they do not own and promise delivery in the future. Assuming that the cost of money will continue to decline, this is done. By purchasing the bear catcher’s pelt at a discount and selling it to the customer, these middlemen earned a sizeable profit overall. These intermediaries are frequently referred to as “bearskin jobbers,” and then “bears.”

With a particular meaning, the word “bear” has become more common among stock traders and investors. Investors began referring to those who anticipated a decline in prices across the board by using words like “bears” and “bear markets.” In comparison, the opposite of “bear” is quickly used after the word “bullish.” It is a byproduct of the brutal bull-and-bear pastime of the nineteenth century.

Bull Market

Photo by Sajad Nori on Unsplash

An extended period when the market is trending higher and asset values are increasing is known as a bull market or bull run. Bullish price activity and bullish investors go hand in hand during a bull market. Positive feedback loops are produced as market confidence rises because upbeat or “bullish” investors will keep driving up asset values. Investors who believe that the price of a commodity will rise over time are referred to as “bullish.” Bull markets, as asset prices rise, generally signify a time of prosperity and trust.

Bear Market

Markets in decline with a downward trend in asset values are characterized as bear markets. Investors start to lose hope that prices will rise as they fall, which fuels further selloffs and downward patterns.

Assets frequently experience market adjustments in the cryptocurrency market. Bear markets and market corrections, however, refer to completely different things. A market correction is usually characterized by a brief decline in price and is less severe than a bear market. In general, markets bounce back more rapidly after corrections and more gradually after bear markets. In a bear market, relief surges or bear traps are anticipated. These are transient price increases that only last a few weeks.

Factors that trigger a Bullish Market

Optimistic investor mood fuels bull markets. However, several factors contribute to the emergence of a crypto bull market to achieve the degree of optimism necessary to sustain rising asset prices. Positive and robust macroeconomic circumstances like rising Gross Domestic Product (GDP) and low unemployment rates are among them. Therefore, factors that alter the trajectory of traditional markets have a substantial impact on crypto bull markets.

Fewer buyers participate in the cryptocurrency market than in more established markets like the stock market because it is still in its infancy. Therefore, the elements that fuel crypto bull rallies might be unique to the market. These include endorsements from well-known media outlets and popular culture, affirmations from reputable financial organizations, an influx of institutional capital, and the introduction of products dedicated to cryptocurrencies, such as exchange-traded funds (ETF). When these distinct crypto-related factors are combined with more established, favorable macroeconomic factors, positive momentum is signaled, and investment interest is piqued.

When all these factors are in place this is the perfect time to enter the Bull market.

Factors that trigger A Bearish Market

Asset values are put under cascading downward pressure as a result of unfavorable investor sentiment. A bull market is characterized by optimism, while a bear market is fueled by dread.

Several things cause dread in cryptocurrency investors. This includes a struggling economy with high unemployment rates, international turbulence like wars or pandemics, unfavorable news about government crackdowns or regulatory prohibitions on cryptocurrency dealing, and unfavorable rhetoric from well-established financial institutions.

When all these factors are in place this is the perfect time to enter the Bear market and make some crypto.

Bullish Market Vs Bearish Market

A bull market and a bear market are mainly distinguished by the movement of asset prices. However, additional traits support investors in recognizing market cycles and patterns such as.

Supply and Demand

Bull markets are defined by rising demand and constrained supply. Most investors prefer to purchase rather than sell, which drives up prices even more. In contrast, people are more likely to be looking to sell than to purchase assets during a bear market. Prices of assets decrease when supply outpaces demand.

Trading Volume

Market cycles can be accurately predicted by trading numbers. Bull markets frequently coincide with active markets. Before a bull market reaches its cycle top, trading volume usually approaches its peak. Conversely, trading volumes are usually low or stable during bear markets.

Investment Attitude

Investor psychology and sentiment are highly correlated with the performance of the cryptocurrency market, as was previously addressed. Investors rush to buy commodities during bull markets in anticipation of higher returns on their investments (ROI). Bull markets, therefore, exhibit high and favorable levels of investor trust. During a bear market, investor mood is frequently negative. Investors frequently panic and abandon their assets, which drives down the price even more.

Wider Economic Outlook

The cryptocurrency market is inextricably connected to the larger economy, just like any other market. Bull markets frequently coexist with strong economies that are experiencing rising GDP, low unemployment rates, higher business revenues, and rising employee wages.

A bear market, on the other hand, is associated with a weak economy that has a reduced GDP and fewer consumers. Increasing unemployment rates, spending, and declining company profits. A weak economy and its negative effects on people cause a general decline in the readiness to take on risk for speculative investments.

Startup Growth

Initial Coin Offerings (ICOs), which frequently herald a rising market in the cryptocurrency sector, see a large influx of new projects. This paper is a useful reference for comprehending ICOs.

On the other hand, new project launches are uncommon throughout a bear market due to the lack of public funding.

Media Sentiment

The general outlook from news sources and social media sites, similar to investor sentiment, reveals market cycle stages. In a rising market, the media’s mood is typically upbeat. More news outlets are reporting on Market gains and outrageous price predictions.

In a bear market, media coverage is frequently negative and more stories spread anxiety, doubt, and dread (FUD).

Innovation

Bull markets typically see high levels of innovation in initiatives. This is due to higher levels of investment and purchasing power, simpler user onboarding, increased user acquisitions, and bigger marketing budgets.

However, innovation and expansion during downturns are telltale indications of an industry-proven project. For instance, the transition of Ethereum from proof of work to proof of stake, which is regarded as the most important technical development in the history of the blockchain, took place during a bear market.

Conclusion

As with any other conventional financial market, there are bullish and bearish price action periods in the world of cryptocurrencies. Even though established crypto assets like Bitcoin are displaying signs of maturity with diminishing returns and losses and overall less volatility compared to previous cycles, the volatility in the upswings and downswings in the crypto sector remains significantly more significant.

Anyone in the space seeking to make a smart and profitable investment must understand crypto market trends and learn to spot them. For long-term success, investors must, however, take into account additional variables before entering the cryptocurrency market. This entails honing a keen eye for top-notch endeavors and assets, learning about cryptocurrency-specific ideas like cryptocurrency wallets, and being conscious of common con games.

Originally published at https://vocal.media.

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The Best Ways to Benefit from Cryptocurrency: A Guide to Bull and Bear Runs was originally published in The Capital Platform on Medium, where people are continuing the conversation by highlighting and responding to this story.