Bull vs. Bear Market: What’s the Difference?

The bull and bear markets are used as trading terms in the stock and crypto markets. Though, the outcomes and meaning of these terms differ widely, depending on what market – crypto or stock – you are talking about.

While many may not understand how these terms are being used in different markets, they are still a very important part of the financial markets trading system. If you want to excel in your trading investments and be seen as someone who has a good understanding of the market, getting familiar with the bull and bear market terms is a must.

Importance of understanding investment terms

The stock and cryptocurrency markets are sometimes tricky and volatile. When it comes to making investments, adequate research and a well-judged, diversified portfolio might be just what you need to maximize returns and payoff.

Bull and bear market: difference in crypto and stocks

Understanding the differences between bull vs. bear markets in the crypto market and the stock market, identifying them, or even calculating their appearances would allow you to optimize investments and lower the risk of money loss.

Therefore, if you are now learning about the crypto world and are yet just planning your strategy for buying and selling cryptocurrency, read along to find the main characteristics of bear and bull markets and how they apply in the cryptocurrencies world.

Bear and bull markets – general explanation

The bull market is regarded as the upward value trend of the stock market, while the bear market is the downward value trend. An economy currently in decline can also be called bearish, while the opposite is said of a strong economy, which is considered bullish.

As you probably know, the cryptocurrency market is more volatile when compared to the stock market, and value swings can be seen daily. Thus, bull or bear market terms are more often used to describe a longer period and more significant price changes in any direction.

What is a bull market?

“A bull market” is a term used in the stock market and refers to the period when the market trend is moving upward continuously. When the market is bullish, stock prices steadily rise for a long time. For many investors, bull markets are utilized to acquire and invest in as many projects as possible to gain from the price rise.

There is a sustained increase in asset prices during a bull market, accompanied by a strong economy and high employment levels.

What is a bull market in crypto?

Nevertheless, crypto bull markets are usually stronger and might be called bull runs.

Also, if the stock bull market is a time to invest in many projects to gain profit, it might be different when talking about crypto. When the cryptocurrency market is bullish for a long time, and Bitcoin or any altcoin reaches its all-time high, there are not many chances to gain profit when investing at peak time.

How long does a bull market last?

Bull markets trend in the stock market typically lasts from a few months to a few years. It is known to last much longer than the bear market. The bull market ensures growth, and it is a more frequent occurrence, with an average of 78% for 91 years. Due to its long years of the occurrence, it gives investors adequate time to make their investments and fixed income securities. Also, get good profits before it finally drops again.

How long does a bull market last in the cryptocurrency market?

However, as mentioned above, the bull market in cryptocurrency lasts for a shorter period. It can also be somewhat calculated because bull markets usually follow Bitcoin halving cycles. Historically, it happens every four years and lasts for about half a year or a year. After it reaches the peak, there’s usually a steady decline and accumulation period that lasts three years or more.

The bull market continues for as long as supply exceeds demand. After a while, markets start decreasing and turning into a bear market.

Characteristics of a bull market

A bull market is characterized by the upward stock price movement, which gives investors the advantage and confidence to make a reasonable investment strategy. More revenues are generated in the stock market and among companies and the overall world’s economy. Below are some of the notable characteristics of the bull market:

● Higher employment rates;

● Increased Gross Domestic Product (GDP);

● High demand for securities;

● Strong economy;

● Increase in Initial Public Offerings (IPOs).

Altogether, pleasing market conditions increase investors’ confidence. Similar factors influence crypto bull market characteristics. However, since they are relatively new and still changing quickly, they also pose differences.

Characteristics of a crypto bull market

As crypto markets are smaller compared to stock markets, the support from celebrities, mainstream culture, and the growing crypto community can influence a lot. Events that threaten fiat and indicate inflation also turn more people to crypto.

And lastly, institutional and business capital investments in crypto (example: MicroStrategy’s investment in BTC and, of course, Elon Musk) can also lead to the hype, which can cause a crypto bull run.

What is a bear market?

The bear market appears when the market trend shows downward movements and continues to fall drastically. There are no gains to be made, and losses are experienced much more frequently. A bear market is considered when the stock market drops by more than 20%.

During the bear market, high financial insecurity and unemployment rates can be expected. The bear market experiences little or no investments because investors are afraid to lose money due to the current market trend.

What is a cryptocurrency bear market?

The crypto market shows higher dips in prices during a bearish period than the stock market. A perfect example of a crypto bear market could be a Bitcoin crash in 2017 when the BTC price fell from $20K to $3K in a couple of days.

Characteristics of a bear market

A bear market indicates the downward spiral trend of the stock or crypto market, which is characterized by a continuous decline in the prices and the general world economy. Some of the characteristics of the bear market include:

● The increased unemployment rates. However, if the crypto bear market does not correlate with a stock bear market, the unemployment rate might not be relevant. Those who live from cryptocurrency gains might want to look for more stable income and traditional workplaces when the crypto bear market occurs.

● Low trading volume. Investors tend to hold their assets when cryptocurrency prices show continuous downward movements, creating lower market volumes. If fear becomes a leading emotion in the market, some might sell their coins and face losses, which will contribute even more to a declining price of an asset.

● Negative news about cryptocurrencies from media channels and economists. How many times have you heard that Bitcoin is dead?

Other characteristics may include weak demand for securities, low investor confidence, overall pessimism, decrease in IPOs.

What is the difference between bull and bear markets?

The Bull and bear markets in crypto and stocks are marked mainly by the price movement downwards or upwards. Also, when a bull or a bear market pattern appears, crypto markets tend to move quicker than stocks. It is worth noting that cryptocurrencies’ volatility and broader daily price movements make it harder to spot bull or bear markets in crypto.

However, let’s explore the main differences between these terms below.

1. The bull market occurs when the stock or crypto market trend is optimistic and has a high rate of investment returns, while the bear market occurs when there is a negative impact or decline in the trend of the market.
   
2. During the bull market, investors experience confidence, and a rise in investment security can be seen widely. In stocks, investors expect positive future results and opportunities. With digital currencies, positive outcomes might not be the case if you buy coins at the top. 
   
3. The bearish market makes investments difficult because of its poor returns. However, buying the dip is a popular move when investing in cryptocurrencies.
   
4. Bear markets affect the economy negatively at a faster rate, while the bull run market recovers, which allows the economy to grow positively in the long term.
   
5. There is usually a high rise in income and employment rates during a bullish market trend. The opposite happens in a bear market – there is an increase in layoffs and a drop in income rates. However, those who rely on their income mainly on cryptocurrency gains might show a higher interest in regular workplaces during the crypto bear market. Investors can have a more laid-back mindset during the bull runs in crypto.
   
6. There is usually more money liquidation during a bull market as investors fund various try activities to ensure consistent money flow. These financial decisions can vary from stocks to gold, real estate, etc. During the bear market, some restraints cause investors to exercise great caution and risk tolerance in their investments, hence making money in circulation limited.
   
7. The bullish market ensures that banks and other financial institutions impose very low-interest rates on loans, allowing businesses to thrive more as they can take out loans and pay them back without problems. The bear market limits the funds given out in loans by banks, and the interest rates are usually higher and difficult to pay back.
   
8. Many international investors would want to make investments in the market because of the good economy in the bull market. The reverse is in the bear market, as foreign investors usually withdraw from making any investments for fear of recording losses.

Investing in bull and bear markets

The bear and bull markets affect the investing strategy of many investors, as no one wants to make a loss. The bull market usually offers a high rate of positive returns from investing in crypto or stock markets. Buying stocks or digital currencies before the rise in the bull market allows investors to enjoy a high rate of return when the market reaches its peak.

When preparing for bear market investments in stocks, making minimal investments and focusing on increasing your fixed assets by using a sound financial planning strategy is recommended.

Bull and bear markets: investing in crypto

However, with Bitcoin, it’s the opposite – you accumulate in the bear market using your fixed-income assets and spend or increase your fiat holdings when taking profits in bull markets.

To avoid being trapped in a financial mess when the market swings hit, it is better to seek advice from investors and financial advisers who can put you through making solid decisions to limit any potential losses.

Sometimes, especially new investors, may not fully grasp the idea of the bull and bear markets. They end up making financial mistakes that could have been avoided with the help of a good advisor.

Is it better to buy in a bull or bear market?

Buying stocks in the bull market is considered a great investment as returns are expected due to the stable economy and liquid money supply. There is usually a decline in investment rates in the bear market because of the limitations, losses, and fear associated with the period.

However, with a good financial advisor, you can decide to buy stocks in the bear market period as you may get them at very low prices while you prepare for the bull market period to sell at higher prices for greater returns.

Buying the dip

However, a phrase frequently used in the crypto community during the cryptocurrency bear market period is – buy the dip. Due to digital currencies’ volatility and relatively sudden changes, buying the dip refers to the practice of buying up several virtual currencies when a severe bearish correction appears. The aim is to hold the crypto that is bought during the low period and wait however long it takes for the prices to return to their highs. In this way, the dip buyers who buy and sell cryptocurrency during the bear and bull market corrections gain a nice profit.

Above all, before making any decision, it is best to consult with investing experts and financial advisors on the best steps to take.

Why is it called the bull and bear market?

In reality, there is no clear contrast between how the terms “bull” and “bear” were coined, but the animals are used because of their mode of behavior and how they approach their opponents. Hence, a bull is said to be able to trust its horns, thus why it is used to denote the market’s upward trend. A bear thrusts its horns downwards, as the market trend shows when it has hit a bear period.

Also, the bull and bear terms may be used to explain market trends because of the historical fights between bull and bear, which were organized as a means of entertainment in the past. 

Study past performance and market trends

Many things influence the bull and bear market appearance in crypto markets. The cryptocurrency market is smaller, younger, and more volatile than the stock market. Thus there are certain differences in trading during bull runs and bearish markets.

Crypto investors often buy cryptocurrencies when the market is down and hold them until the bull market appears. Although there is always a risk when investing, many different investment strategies are to consider.

However, continuous study of the stock or cryptocurrency market performance and past trends would allow you, as an investor, to prepare an investment strategy for the market changes. Also, keeping up with the news and market changes can help form an overall picture for your investments.

Getting adequate knowledge about the market trends, their key takeaways, and carefully planning out your investments together with the market direction would ensure you achieve success most of the time.

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Disclaimer: The information contained in this message and any information liked through the items contained here is not intended to provide sufficient information to form the basis for an investment decision. The information presented here was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before purchasing or selling any such instruments.