Bull Market and Bear Market are two common terms in the crypto industry, referring to two market ups/downs. Accompanied by a group of characteristics revolving around these two market trends: Market confidence, investor sentiment, and advice on corresponding investment actions.
Understanding the Bull and Bear markets helps you have a more sensitive view of the market. You will have a better foundation for predicting the upcoming market trend and making more effective investment decisions.
1. What is a Bull Market?
The characteristic of a Bull’s attack is to raise its horns high, pointing straight ahead like the uptrend of the market graph. Therefore, the rising market period is often called the “Bull Market”.
A Bull Market (bull market) is a period when most investors are buying instead of selling. Demand is greater than supply. Market confidence is high, and asset prices are growing strongly. Optimistic green color covered the market, and the good news spread everywhere.
As investor confidence increases, the more they buy, the more prices rise. This attracts other investors to invest more, causing prices to continue to grow, and the market attracts new investors. Investors who believe that the price will rise over time are called “bulls”.
What to do in the Bull Market?
- Avoid the FOMO:
Investors are usually very optimistic about the price going further in the Bull market. This leads to FOMO psychology, making it easy for investors to buy continuously and neglect risk control and capital control.
Remember that, although the market is rising, it will never go up forever because liquidity is always cyclical. The market can plummet at any time. Therefore, investors should clearly define investment goals, control greed, and fear to avoid “swinging to the top.”
- Understand Market insight:
The price of a given cryptocurrency is significantly influenced by public confidence and sentiment in that asset. Catching the appearance of the Bull market helps investors determine the level of optimism in the market. Instead of “unconsciously” immersing in the general psychology of the market, investors should practice recognizing possible psychological patterns, thereby finding a rational, objective, and more sober direction than the majority.
2. What is a Bear Market?
The bear’s characteristic attack is to slam its claws down on its enemies, like the downward trend of the market graph. Therefore, the period of a decreasing market is called a “Bear Market.”
A Bear Market (bear market) is a period in which most investors are selling. Supply was greater than demand. Selling power overpowered buying power, causing red to cover the market. The majority of investors lost confidence in the market. They are pessimistic and believe that prices will continue to fall. They are called the “bear faction.” The Bear market is quite challenging to trade compared to the Bull market, especially for less-experienced traders.
What to do in a Bear Market?
- Understanding the market and control your emotion:
It is difficult to predict when the Bear market might end and where the bottom will be. Because market recoveries are often slow and unpredictable, many factors can influence — externalities, such as economic growth, investor sentiment, and news or social events.
Instead of panic, pessimism, and loss of confidence in the market, you should believe that the market has an alternating up and down cycle. Keep yourself confident and able to make objective decisions more rational, free from greed and fear.
- Courage to cut losses:
The bear market often comes unexpectedly, causing panic and sell-off in most investors, causing the red color to flood the market on a large scale like a Domino effect. Consider cutting your losses to maximize your protection, as a Bear market can last longer than you think.
- Prepare a long-term plan:
While the Bull market inspires attractive investment decisions every day, the gloomy Bear market is the motivation to prepare for a longer-term investment plan.
If you’re willing to pursue a longer-term investment strategy, the Bear market is your chance to get a good buy price, yielding good returns when the bulls cycle returns. The Bear Market is also a good time for a price averaging (DCA) investment strategy. You periodically invest a sum in your target asset (E.g. 50 USD in Bitcoin every week). This spreads your risk, and the Bear market helps lower the average cost of capital.
The above are general concepts and factors surrounding the Bull and Bear market. These are the two inevitable phases of the market: If there is no Bull, there will be no Bear, and vice versa. Capturing the Bull and Bear market helps you understand market rules better, thereby making better investment decisions.