Bull market and bear market are two concepts that refer to the up and down movements of a stock or even a cryptocurrency. In other words: everything that, in one way or another, presents a market movement, whether positive or negative. These concepts become popular as interest in the financial market also increases. Because of this, they are more in vogue than ever and, if you are interested in these market movements, you will have to deal with one of these concepts at some point. Because of this, we have prepared a complete guide on these two concepts and on how you can use them in your analyses, giving the name of the horse, as it is popularly said. This can make, as time passes, your analyzes more robust and, above all, more indexed to what is generally practiced in the financial market. Thus, internalizing these concepts can also contribute to your life as an investor as a whole, making it possible to make analyzes and reflections even more supported in what is generally practiced when it comes to financial asset transactions.
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Inside the subject: bull market and bear market
In a free translation, we are talking about two markets, the bull market and the bear market, respectively. But that doesn’t tell us much, right? See below what each of these markets are and how they are directly related to the stock market, investments and cryptocurrency price fluctuations. ATTENTION These concepts are always related to a macro situation, be it of a market, be it of all markets at the same time, be it of a country. Therefore, we need to be careful when ruling that an asset has simply melted or is in good shape.
What is bull market?
Bull market is related to the bull market. Whenever this expression is used, whether by you, an analyst or a person you trust, know that we are talking about a good moment in this market and that it points to a rise in the value of assets. The representation of the bull is all about a bullish market. So much so that it is the figure of a bull that we find on Wall Street, in New York. On Wall Street the representation concerns bullish behavior, which refers to “like a bull”. In other words, like a bull, the market is in full swing, strong and vigorous, moving up. That way, whenever an analyst says that the market is in a bull market, it means a wonderful thing: your assets will tend to appreciate in the next moments. It’s the bullish itself happening with your investments. And yes: this goes for stocks as well as cryptocurrencies. That is, it is valid for any type of market in which its financial reserves are located.
What is bear market?
While the bull represents a vigorous, imposing and even optimistic market, the bear market symbolizes its exact opposite. The bear figure stands for laziness, while the bull figure stands for vigor. Although they are heavy and robust, the activity of each animal is quite different. And, in the case of the poor bear, there is still another factor that goes against him: when this animal attacks, the movement made with the paw goes from top to bottom. So, in the financial market, this couldn’t mean anything else: we are watching a market plummet, or even melt, to keep within the jargon of the financial market. Thus, the bear market is related to a downward movement, which can also symbolize a moment of pessimism among investors. Like bullish, the market has also adopted an appropriate expression for the market in bear maket: bearish, which means “like a bear”.
What to consider in practice?
When it comes to the financial market, whether cryptographic or traditional, we are always talking about a very old law, but which applies to absolutely everything in our lives: the law of supply and demand. This applies in our job market and even in the value of products on the supermarket shelf. It applies to fuel and even the amount we are going to pay in rent or in our condo. That is: whenever the supply of something is high, but its demand is low, the value tends to decrease. However, as soon as this value starts to attract consumers, it is natural that its price increases, after all it is now possible to sell without price being the decisive factor. The same is true when we are talking about cryptocurrencies. In 2021, when Bitcoin reached its highest value ever, many people began to invest in this market, after all, its supply was excellent, which generated demand. In this way, the value continued to increase until the people who invested began to liquidate their investments, causing the asset to fall – among many other factors, it is always worth remembering. From this example, we can then think of the following: in 2021, when the cryptocurrency reached its all-time high, we witnessed a bull market moment. At that time, the market as a whole was bullish and more and more people were looking for the cryptocurrency, causing its price to skyrocket to an all-time high. However, soon after, motivated by international crises, above all, the value of cryptocurrency began to fall. That is, more people began to liquidate their positions, creating a bear market. In this way, we had a bearish moment – although we are entering a recovery trend – and, thus, a pessimistic moment in relation to this market as a whole.
Examples
To better understand what each of these markets are, it is important to think first that they always refer to a macroeconomic state. In other words, many variables need to be analyzed before drawing a verdict. The pity, for this verdict, when false, is that an entire market will experience terrible moments in the future, when people make investments in something that is not safe – although every investment does have a risk margin, be it less or greater. Thus, it is always important to have these relationships always very clear in our ideas, so that we can make investments that really make sense and that can meet our expectations, both as investors and socially and personally.
bull market
One of the most classic examples of bull market has to do with the LUNA token. In 2021 alone, the token rose by more than 14,000 percent. Another example of this has to do with Axie Infinity and its token, which in 2021 appreciated by more than 11,000 percent. However, if you are a person who has been following the news of the cryptocurrency market, you know well what happened with both tokens. But if not, it’s time to know: the two tokens just melted. They almost turned to dust. Even so, with values much lower than they once were, they have today achieved a certain stability, albeit far from what investors in these cryptoassets expected to see. In general, whenever an asset appreciates more than 20% in relation to the lowest low of the cycle, we are talking about a bull market. However, it is always necessary to reinforce that all this is linked to a macroeconomic plan and analyzing this event in isolation can be tragic for your portfolio.
bear market
Keeping our example within cryptocurrencies, we can point to this moment as a bear market for Bitcoin. Since April this year, the asset has faced devaluation, reaching, for the first time in its history, having seven consecutive weeks of decline, which is a clear representation of a market, to be more optimistic, in deep discouragement. As we said before, at a time of bull market, people tend to buy more of the asset, mainly because they see a high demand for it and, therefore, they see it quite optimistically. The opposite occurs in a bear market, because when there is a fall, people who bought at the time of appreciation and a very interesting offer in their eyes, liquidate their positions, causing the asset to plummet even more. In this way, the example of Bitcoin is even more special to symbolize the two moments, both in the bull market and in the bear market, being one of the most sought after assets worldwide in the last year.
How to recognize a bull market?
As we said, the bull market is a moment that represents strength in the market. That is, whenever a bull market occurs, we are talking about a very favorable moment for negotiations, given that the market is quite optimistic. With an optimistic market, the values applied continue to “throw up” the investment, making it always more attractive to other people. In this way, when an asset shows a constant increase, we end up taking it as better than another, making it an option even for those who have no previous experience with investments. However, this upward movement alone cannot be isolated to define what a bull market is, since we depend, above all, on this movement continuing to “play” the value of the asset upwards and this is only possible when there is , in fact, security. This security we are talking about concerns some points that we must take into account: Solidity of the asset; Fees that apply to your transactions; Sustainable growth; Broadcaster best practices. Taking LUNA, a token issued by Terraform Labs as an example, we can see that not all of these points could be validated. In this way, the collapse of the cryptocurrency, while it could not be guaranteed, could be expected. The opposite does not seem to be in sight when it comes to Bitcoin or Ethereum, for example.
How to recognize a bear market?
The bear market representation is quite simple to see: it is a clear downward movement, which can be associated with multiple factors. When it comes to the bear market that hit the LUNA token, to continue the previous example, we can assume that this occurred given the complete fragility of the ecosystem, which lost parity with the dollar – when that was its function. In this way, the token melted and caused the system as a whole to collapse. The result, so far, appears to be the death of the crypto asset, which could go into a state of continuous hibernation. Now, when it comes to the bear market that hit Bitcoin, the idea is a little different, as this moment is understood to be fleeting. The signs of this point to the fact that the asset is safer than others in its class, above all, which gives it greater chances of recovery in the long term. Thus, the signs are: Decline in asset value; Financial or state-related crises; Unfavorable political situation in relation to cryptocurrencies
In conclusion…
Like any other type of investment, whether it is made in stocks, mutual funds or even real estate funds, the cryptocurrency market can be a small – or huge – box of surprises. This, however, is far from saying that there is no rule or even any standard that does not allow us to see what awaits us around the next corner. Quite the opposite. Knowing bullish and bearish patterns helps us know when to invest, how and how much to invest. In other words, it helps us protect our investments, making it possible to see them prosper – which is, of course, your ambition as an investor. Also read: What explains the rise in cryptocurrencies amid bad news and crypto company crises? Read also: Binance loses dispute against Capitual in dispute over restoration of cryptocurrency operations Read also: MP will receive training from Binance on actions against cryptocurrency fraud
