What is a bull market?
When trading crypto, you have probably come across the term bull market several times. This term is often used in conjunction with a bear market, which is just the opposite of a bull market. You will probably wonder why animal names are used to describe markets and what people mean with these names. So, what is a bull market? And what are famous examples of bull markets? We’ll answer all your questions in this article!
What is a bull market?
When there is a bullish market, there is great confidence among investors. The people who attend such a market are also called the herd. This is exactly the most sensible strategy in a bull market: go with the trend. A bull market is a great time to buy shares.
It is important to have clear mind in a bull market; after every peak there is a valley. As it turned out in 2008
, such a valley can be quite deep and last a long time. When the prices start to fall, it may be wise to sell your shares or coins again.
When do we speak of a bull market?
A bull market usually takes place when the economy is picking up or is already strong. This often happens in line with an increase in the Gross National Product. Unemployment is decreasing, while corporate profits are increasing. Signals that indicate that there is a bull market in the cryptocurrency are:
- Less deep lows
- Emerging market currencies dominate the market
- There is a correction after a decrease
- Rising averages
- (Rapidly) rising prices
- Higher peaks
- Increased activity in analysis and discussion groups: positive reports
What is a secular bull market?
When a positive price development lasts between 5 and 25 years, we call it a secular bull market. One of the best-known examples of a secular bull market took place in the US stock market. There, growth lasted from 1982 to 2000, with the Dow Jones Industrial Average gaining 16.8%. This was followed by a bear market, with a return of 6.2% from 2000 to 2009.
The most recent cryptocurrency bull market
Bitcoin has also experienced a bull market several times. The most recent bull market will still be etched in the minds of many. In the year 2017, the prices of Bitcoin
and cryptocurrency soared.
Suddenly everyone was talking about digital currencies, from the supermarket employee to Warren Buffet and Robert Kiyosaki. The fear of missing the boat was immense, and cryptocurrency exchange offices were busier than ever. This phenomenon is also called FOMO: the Fear Of Missing Out.
In that year, everyone had boundless optimism in cryptocurrencies
. ICOs popped up like mushrooms. Everyone wanted to get rich quickly by investing in (new) cryptocurrency's and tokens. #WhenLambo was a widely used hashtag on Twitter.
Not entirely unjustified: the price of bitcoin shot up in one year from one thousand euros to more than sixteen thousand euros.
What does bear market mean?
A bear market is the opposite of a bull market and means that the prices of a financial product fall sharply. Many websites describe a decrease of twenty percent. It is no coincidence that the bear is used as an example. When a bear attacks its opponent, it hits down with its claws. You can also compare this nicely with the falling prices.
There’s also another story about the origin of the term bear market. For this we have to go back to the 18th century. Bearskin intermediaries sold the skins before receiving them from poachers. They hoped that the cost price would fall in the meantime. A "bearskin jobber" was called such a person at the time. This was quickly shortened to "bear," and that's where the bear comparison comes from.
During a bear market, investors are generally pessimistic about the future. When someone says they are bearish, they are actually indicating that they believe the prices will decrease over time.
In Frankfurt you can see a statue of a bull and a bear near the building of the stock exchange. This symbolizes the proverbial "fight" between bullish investors and bearish investors.
From bullish to bearish and vice versa
The term "bullish" equals optimism: investors look positively at the current and future market. "Bearish" means the opposite: investors look at the market with pessimism and wait to invest. Both market situations are important when investing in cryptocurrency. Investors often switch from one sentiment to another. A number of factors play a role in this:
- Global economic concerns / problems
- National economic data
- Financial business performance