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Is It Better to Buy In a Bull or Bear Cryptocurrency Market?

Bull and Bear markets are household terms in investing, but do they affect cryptocurrency as they do stocks? If so, when should you buy?

Origami bull and bear standing next to each other.
Image courtesy of Canva

Bull and bear markets have been a trend in stocks its entire existence, and anyone who watches the news knows basically what they both mean. However, cryptocurrency is a different animal, so do bull and bear market trends apply to crypto?

Bull market trends mean stocks are expected to rise while bear market trends are the opposite. But, what do they mean in more detail? Can you predict them? When do you buy or sell during either market? And, most importantly, does all of the above apply to cryptocurrency?

We have many questions to answer in this article. Still, our focus is to have you walk away with a better understanding of the origin of bull and bear market trends, their effect on cryptocurrency, and whether or not you should buy during bull or bear.

Let’s get into it.

What are bull and bear markets?

Bull markets

A bull market originates from a bullfight, where the bull would be hurt enough to be too tired to fight back as the matador stabbed his sword between its shoulder blades. That metaphor has been adopted as one meaning of bull markets. In this context, investors are charged with attacking profitable stocks and bringing them down by stabbing them at their own risk.

For example, bull markets typically consist of a bull and bear market and an uptrend. When the bull is charging, the bull market begins, and the value of cryptocurrencies increases. Thus, a bull market is often attributed to bullish investors on the currency, resulting in more demand for the cryptocurrency, consequently raising its price.

Therefore, it’s the investor who starts bull markets by buying securities. You can do this with fiat currency since bull markets tend to raise the price of most securities. The bull market continues as long as demand exceeds supply, and after a certain point, the bull tires and the bull market turns into a bear market.

Bear Markets

In bull markets, investors tend to buy stocks or digital currency without caring about the underlying fundamentals. This drives prices up. In bull markets, it’s easy to be confident and feel like everything will work out. As a result, investors can make bullish bets and keep on buying as they’re able to ride the bull upwards easily.

In bear markets, this confidence disappears, and prices start dropping as soon as new information hits the market that’s not favorable for that particular stock. Then, when all the bad news hits and investors panic and sell their holdings, this creates a downward spiral where nobody wants to buy anything because they think there will be more bad news coming soon.

After the bear market calms down, investors begin to gain confidence again, and the bull cycle starts anew.

So, what does this mean for cryptocurrency?

Do bull and bear market trends have the same effect on cryptocurrency as stocks?

Bull and bear market trends have the same effect on cryptocurrency as stocks, but it’s a bit more complicated.

The complication is that cryptocurrency is susceptible to fluctuations that differ from stock market trends because cryptocurrency markets move faster once trends take hold. For example, bull and bear markets are easy to spot in stocks — bull markets start slow but eventually pick up speed as the bull picks up momentum until it becomes unsustainable, creating a peak that looks like a mountain peak or semi-circle slope.

Once the bull market begins to decline, this is when you see bear market trends. Bear markets look like the bull market peaks but inverted with a diagonal line moving downward. Unfortunately, when bull and bear market trends apply to cryptocurrency, it’s harder to tell since bull and bear crypto investors give feedback that affects cryptocurrencies differently than stocks.

For example, bull markets in stocks are typically created by bull investors who expect the bull market to continue upward. However, in cryptocurrency bull markets, this isn’t always the case.

One example would be if crypto markets are recovering from a bear market and an investor enters bull investing mode, they’re likely to drive the price up much faster than it usually would. This bull investor would be in bull investing mode because cryptocurrency bull markets move much more quickly than bull market trends for stocks, and they do so because of the nature of crypto investors.

Cryptocurrency bull markets are often short compared to bull market trends observed in traditional capital exchanges like the New York Stock Exchange (NYSE). They usually last anywhere from a few days to a month. As bull markets increase in strength, bull investors will also decrease because they will likely sell the currency and cash out.

Therefore, bull and bear markets affect cryptocurrency with its added volatility and speed at which exchanges happen. Fortunately, an investor does have the tools to work these markets if they remain vigilant. However, if you are a casual investor, don’t worry. You are more likely to sit on your investments anyway (hopefully).

Can you predict a bull or bear market trend?

The best way to predict bull or bear markets in cryptocurrency is by identifying the pattern that affects them. In addition, Crypto bull markets are often affected by investors, which have several different effects on rates of ascent and descent for prices, so it’s essential to pay attention to these fluctuations.

Cryptocurrency market movements are also more volatile than markets observed in traditional exchanges like the New York Stock Exchange (NYSE). This means they can change faster than an average bull market does for stocks. However, cryptocurrencies are less susceptible to changes because they’re digital currencies. In addition, investors do not deal with physical goods like stocks, meaning cryptocurrency bears cannot put pressure on something like RONA Inc (ADR) (RNN-Q), even if their goal is to drive down RONA’s stock price.

This means bull and bear market trends have a more challenging time affecting cryptocurrency instead of the other way around, but it still happens. It just takes a lot more to shift a bull or bear market for cryptocurrency than it does for traditional exchanges like those found on Wall Street. However, once the cryptocurrency market enters a trend, it moves fast.

Observing past trends can help predict bull and bear market trends in cryptocurrency, but here’s where things get a little tricky. Crypto bull markets typically last only a few days to a month, while bull markets observed on traditional exchanges like the New York Stock Exchange (NYSE) can go on for years.

Therefore, you must look at past trends, stay up-to-date on cryptocurrency news, changes, and developments if you want to have a chance to capitalize on a bull or bear market trend.

So, is it better to buy in a bull or bear market?

Buying during a bear market has the obvious benefit of cheaper prices on cryptocurrency. Therefore, when the bull market trend comes back around, you have the chance to make money. However, buying during a bull market can contribute to the upward momentum of the market trend and thus make you money. Both have their risks, so you must understand past trends and keep up with cryptocurrency news. If you are a casual investor, I wouldn’t worry about the particulars. Buy what you feel you can afford and what aligns with your personal goals.

I’m not a financial advisor, so educate yourself as much as possible.

Conclusion

The bull and bear cryptocurrency markets are affected by many factors, from investor sentiment to market trends. Observing past bull and bear crypto market patterns can help you predict upcoming ones in the future. However, it’s always essential to stay up-to-date on current events that affect these markets. There is no guarantee when they will change or how long they’ll last for. But if you want your chance at capitalizing on a bull or bear cryptocurrency trend, be sure to pay attention!

However, if you’re a casual investor, I wouldn’t worry too much about trends as it’s likely investing isn’t your primary source of income. Still, it doesn’t hurt to educate yourself as much as possible when it comes to cryptocurrency.

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T.C. Gunter

T.C. Gunter

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T.C. wants you to read his words. Hoping that the words transform you. Not in some grand way like spiritual rebirth. But more like a act of kindness or a smile.