Cryptocurrency Bear vs Bull Market – What’s the difference?

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“Financial analysts use bull” and “bear” terms to describe the market performance. They represent the rise and fall in the value of a financial asset. For example, in the cryptocurrency space, a rising market is called a ‘bull market’ while a falling one is called a ‘bear market’.

These powerful terms, “bear” and “bull”, are believed to be derived from how animals attack their opponents. A bull thrusts its horns upward while a bear swipes down.

Given the constant volatility of the crypto market,  the terms bull and bear are more often used to describe an extended period of an upward or a downward price movement. 

Facts about a bull market

A bull market is a sustained upward market movement resulting from favourable market conditions. It signifies a market rise which is usually followed by positive investor sentiments. 

Bull markets in cryptocurrency are usually more prominent and sustained, and the buying pressure on the asset increases.

A bull run can involve as high as a 50% price increase in just 24 hours in a crypto market. This is due to the higher volatility in the crypto markets compared to other financial assets. 

Facts about a bear market

On the other hand, a bear market is a condition in which the value of crypto continues to fall rapidly. A good scenario of a typical bear market is the famous cryptocurrency crash in December 2017. Bitcoin fell from $20,000 to $3,200 within a few days. 

A severe bear market can impact as high as a 40% price fall on a crypto asset. The downward trend also affects investor sentiment, and this results in a further fall in price, as more and more holders panic-sell their assets to cut losses. 

A bear run can arise from negative media vibes known as “FUD (fear, uncertainty and doubt)” or unfavourable government policies. Bear markets also drop general optimism and confidence that most investors have during bull runs.

Despite the negative mindset around a bear market, most investors look forward to a severe bear run to position themselves in the market and maximise profit when the price eventually rises.

Critical differences between bull and bear markets 

Supply and demand

In a bull market, the demand for cryptocurrencies outweighs the supply because more investors are willing to buy than sell. 

On the other hand, In a bear market, more people are inclined to sell and take profit or salvage what is left of their capital than buy, which drives the supply higher above the demand.  

Outlook of investors

The crypto market performance and investor psychology are intertwined. There is a confidence boost among investors and prospective buyers in a bull market, and the price keeps rising.  

But In a bear market, there is a negative investor sentiment toward the crypto market, and as such, many panic-sell their assets, which further lowers the price. 

Final thoughts

Several factors influence bull and bear crypto markets. First, the cryptocurrency market experiences more volatility than other financial markets due to fewer players. Both market conditions are critical in the crypto market. While investors prefer to buy during a bear run, they sell at the peak of a bull run.