Bull / Bear Markets 101

The cryptocurrency market moves in cycles, constantly switching between bull markets and bear markets.

With Bitcoin's price having recently surpassed $100,000 for the first time, the general opinion is that we're in the midst of another bull market (or at least, we were), but what exactly does that mean?

We discuss the differences between crypto bull and bear markets in our latest "Prosper 101" post.

What is a Bull Market?

A bull market is marked by periods of favorable economic conditions, usually over a prolonged period of time, with the market (or markets) experiencing an extended uptrend.

Generally speaking, investors are positive about the short- to medium-term future, with bullish markets linked to continued optimism.

Within crypto, a bull market can typically be characterized by:

• Sustained increases in cryptocurrency prices
• Higher trading volumes
• Demand outweighing supply
• Mainstream interest in cryptocurrencies
• Over-pricing of certain projects

What is a Bear Market?

A bear market is one in which assets are experiencing an extended downtrend. Bear markets are linked to continued pessimism, and investor sentiment is typically negative.

In crypto, there are usually some indications that a market is bearish:

• Sustained decreases in cryptocurrency prices
• Price dips of more than 20% from previous highs
• Negative sentiment within mainstream media
• Lower highs and lower lows
• Supply outweighing demand

It's important to note that it's perfectly possible to witness significant price decreases during a bull market—this doesn't automatically mean that the market has turned bearish. However, if this downtrend lasts for weeks (or months), then it's likely that the bull market is over.

How Do You Know When a Bear Market is Over?

It can be incredibly difficult to predict the bottom of a bear market, with price rebounds historically being slow and unpredictable. Given the influence that external factors—economic growth, investor sentiment, and macroeconomics—have on the cryptocurrency market, it can often be a case of waiting for "stars to align".

Investing in Crypto Bull and Bear Markets

When looking to invest in crypto, it's important to be aware of investor sentiment and market performance as the two are inextricably linked.

Remember, it's almost impossible to time the market, which is why many experienced investors will buy crypto at regular intervals, regardless of whether it's a bull or a bear market. This strategy is known as dollar-cost averaging (DCA) and can help investors to avoid the emotions associated with market trends.

Perhaps most importantly, investors should invest in quality projects by conducting fundamental analysis. This is a long-term strategy that acknowledges the fact that the cryptocurrency market typically moves in cycles. Investing in projects with solid foundations, a long-term strategy and, real, mainstream adoption can be a good strategy for investors with a longer time-horizon.

Conclusion

The cryptocurrency market is an especially volatile one, which can make it a risky proposition for investors.

Experienced investors will typically look for projects that have a strong long-term outlook, with solid fundamentals, limited supply, and the potential for widespread adoption.

These are just some of the reasons that people turn to Bitcoin.