WHAT'S BULL AND BEAR MARKET MEANS ?
Markets that are experiencing sustained and/or significant growth are called Bull markets. Markets that are experiencing sustained and/or significant declines are called Bear markets. Each of these markets presents a particular set of opportunities and pitfalls
Whether you're interested in crypto-currencies, stocks, real estate or any other asset, you'll often see markets described in one of two ways: bull market or bear market. Simply put, a Bull market is a market that is booming, while a Bear market is declining. Because markets often experience volatility from day to day (or even within the same day), the use of these two terms is generally reserved for :
- Longer periods of predominantly upward or downward movement
- Significant upward or downward fluctuations (20% is a widely accepted percentage)
So what is a Bull market?
Bull markets are defined by a period when the majority of investors are buying, demand is greater than supply, market confidence is strong and prices are rising. If, in a given market, you find that prices are trending up rapidly, it could be a sign that the majority of investors are becoming optimistic or Bullish about prices continuing to rise, and it could mean that you are in the early stages of a Bull market.
Investors who believe that prices will rise over time are called Bulls. As investor confidence grows, a positive feedback loop emerges, which tends to generate new investment, leading to further price increases.
Since the price of a given cryptocurrency is largely influenced by the public's confidence in that asset, one strategy some investors adopt is to try to determine investor optimism in a given market (a measure known as "market sentiment").
What marks the end of a Bull market?
Even during a Bull market, there will be fluctuations, declines and corrections along the way. It is easy to mistakenly assume that short-term downward movements mark the end of a Bull market. That's why it's important to look at all the potential signs of a trend reversal from a broader perspective, looking at the price movement over longer periods of time (investors working on a shorter time frame often talk about "buying the dip").
History has shown that Bull markets do not last forever: at some point, investor confidence will begin to decline. Its trigger can come from any factor: bad news, unfavorable legislation or unforeseen circumstances such as the COVID-19 pandemic. A strong downward price movement can trigger a Bear Market, in which more and more investors believe that prices will continue to fall, causing a downward spiral as they sell to avoid further losses.
What is a Bear Market?
Bear markets are defined by a period when supply exceeds demand, confidence is low and prices are falling. Pessimistic investors who believe that prices will continue to fall are, therefore, called "Bears". Trading in Bear markets can be difficult, especially for inexperienced traders.
It is well known that it is difficult to predict when a Bear market might end and when the lowest price has been reached, as the rebound is usually a slow and unpredictable process that can be influenced by many external factors, such as economic growth, investor psychology and world news or events.
But these markets can offer opportunities. After all, if your investment strategy is longer term, buying in a Bear market can pay off when the cycle turns. Investors with short-term strategies can also watch for temporary price spikes or corrections. And for more experienced investors, there are strategies such as short selling, which is a way to bet down on an asset. Another strategy used by many cryptocurrency investors is Dollar Cost Averaging, which involves investing a fixed amount (say $50) each week or month, regardless of whether the asset is rising or falling. This spreads your risk and allows you to invest in both Bull and Bear markets.
By the way, where do these terms "Bull" and "Bear" come from?
As with many financial terms, the origins are not clear. But most people believe that the terms originate from the way each animal attacks: Bulls kick upwards with their horns, while bears kick downwards with their claws. There is obviously a long list of theory and evidence surrounding the origin of these terms. If you want to know more, this explanation from Merriam-Webster is a good start.