From Bulls and Bears — How they make the market
When you are new to trading and start reading any analysis of current markets, be it stock, real estate or crypto, you will soon stumble across our feline friends: the bear and the bull.
While the first has found his way into most kid’s rooms in the form of a teddy bear, the latter is often feared and presented in violent spectacles like bullfights.
In the following paragraphs, we will explore, what these two animals have to do with any market you could be trading on.
Sometimes commentators say things like “the bulls are taking over” or “I am bullish on asset X. “.
Before explaining, what they mean by that, let’s think about what bulls actually stand for. When you hear the word “bull” or see one, what would your first association be?
Many would say aggressive, strong, angry or determined.
Since early on, humans have used bulls in agricultural context to move things, like a wagon, forward. Whenever a bull would move his horns upwards, anything close would move upwards as well. Similarly, whenever people talk about bulls in the context of trading it is to signal an upward trend with prices increasing.
“I am bullish on asset X. ” — I am positive that the price of asset X will rise. I believe in asset X.
“The bulls are taking over. ” — After a period with relatively stable or falling prices, the prices are moving upwards again.
When someone tells you that the market is looking bearish, you might want to reach out for that teddy bear to comfort yourself if you have invested a lot of money.
From Korean mythology to American culture, bears have found their way into many popular movies and stories all across the globe. In many of these bears are represented as cute, loveable, playful companions(Winnie the Pooh, Paddington).
Nevertheless, bears are wild animals and as such might look cute but can strike deadly on their pray. When the bears have set their eyes on the assets you have invested in, then you might want to consider selling.
Consequently, a bearish market describes a market, in which prices are moving down as if a bear struck down on them with his paws. Being bearish means that you believe that prices will go down and that you generally have a more negative outlook on something.
Bullish and bearish are frequently used terms across different industries in financial news, trading articles and papers. Everyone who wants to understand trading better should at least be familiar with these terms. You might even start integrating them into your vocabulary when chatting with others about your views on different cryptocurrencies.
Especially in cryptocurrency markets, the market sentiment can change pretty fast. In the last days, we saw a huge drop in prices which caused many to point out that bitcoin was in fact not the safe-haven asset it presented itself to be. However, we moved from that bearish sentiment pretty fast to more bullish sentiment, at least if you believe crypto-twitter, where bitcoin is now celebrated as decoupled from traditional markets, having increased more than 20% in price in just 24 hours.