If you are new to the world of cryptocurrencies, you may have come across some quite confusing terms. A lot of these terms have become pretty well-known in the crypto communities. So much so, in fact, that nobody bothers to ever provide an explanation for them. Terms like Bullish or Bearish are definitely among those, and while they are not crypto-specific terms, they are a part of nearly every news or article that touches upon cryptos in any way.
So, if you plan to become a crypto trader, holder, or even just a regular crypto enthusiast, knowing what they mean would be quite helpful.
Bullish And Bearish Markets Explained
Bearish and Bullish are the terms that describe the market's current condition. For example, when the market is losing its value, we call it Bearish. If it gains value, it is called Bullish. The crypto market is usually reflecting the investors' emotions and stance towards the currencies.
With that in mind, whenever a positive development happens, and the positive news flood the media outlets, the prices of cryptos are going up in a bull run. Negative news, obviously. has the opposite effect. Sometimes, the market also reacts to certain moves made by investors themselves. For example, if a group strategically decides to buy large amounts of a certain coin, its price might grow in an instant, as the coin is perceived as valuable. The opposite is also true, and it a large amount of coin gets released by an influential holder, its value might drop, as the investors fear that the holder is trying to get rid of the coin for some reason. Now that we know the basics, let's do a quick overview of both types of market.
An Overview Of The Bullish Market
The bullish market, as stated, is used to describe the market that is growing in value. This happens whenever the cost of an asset grows, and it means that the market is high, and profitable for investors. Most investors buy coins when their prices are low, and then sell them at a higher price when the market goes bullish.
The term has been around since 1714, although there are numerous stories and myths regarding how and where it originated from. One story claims that it comes from the position of the bull's horns during its attack. Its head is lowered down, while the horns aim upwards. The market acts in a similar way. and the prices are steadily growing from the low point to new heights.
As such, it can be identified by a few important factors. It should be noted that those factors are not always certain signs that the market is going bullish, but can serve as general guidelines. In any case, it is useful to know them, and with experience, every investor starts seeing them before the prices start to climb.
The bull market is known for bringing optimism and confidence to investors, and they become willing to take risks and invest in many new assets. Since the confidence is high, a lot of investors give up on their plans on selling the coins that they already hold, hoping for even better prices. At the same time, those coins are doing exceptionally well, which also awakens the desire to purchase them in other investors. In the end, the price continues to rise due to high demand.
The healthy economy usually means that people have more money and that they are willing to spend it. With more money in the investors' possession, they feel like they can use more of it for risky crypto purchases. However, such purchases usually have a very positive effect on the market, and the prices continue to grow.
This may be the most important factor behind the crypto prices, as they are only valuable as the investors believe that they are valuable. If nobody is interested in a coin, it becomes useless, which is why the thoughts and feelings of investors are critical in determining the price of coins. We have already established that there is a lot of optimism and money spending during the bullish market. As long as the investors remain optimistic regarding the coins, their value will be high.
Now that we have covered the bulls, let's see what we can find out about the bears.
An Overview Of The Bearish Market
The bearish market is the term that describes the market that is losing its value. This is where the asset prices are dropping down. This is also a period when the investors are doubtful and pessimistic about some coins or even the entire market. The confidence glows down, rumors start to travel around, and the investors are either selling their coins or are waiting for more positive changes.
The term came together with the Bullish market, back in 1714. It is called bear market due to similarities with bear attacks, hen the bear paws swipe down to hit its rival. Opposite of the bull horns, this is a descending pattern, and it serves to describe the drop in prices.
This type of market can also be recognized by certain factors, similarly to the bull market. Only, where there were once positivity and trust during the bullish period, there are now pessimism and doubt.
During the bear markets, demand for new coins can get quite low, while the supply is constantly growing. As you can imagine, the price goes down because of this. This signals that people are mostly looking to sell, while the buyers are nowhere to be found.
Bearish markets can often signal a weak economy. Basically, the investors do not have as much money for investing and are distributing the money that they do have with greater care. This makes them unwilling to take risks, and as a result — they usually stay clear from the market.
Just as the bullish markets, the bearish markets also depend on the investors' feelings and thoughts. At times, the investors fear that investing is a bad move and that the coin they are interested in has no future. This keeps them from buying it, and the coin's price suffers. Instead of buying coins like these, the investors wish for more stable assets. The market grows increasingly unpopular, and the prices continue to drop. If some bad events happen, the investors lose faith in the market even more, and the downtrend continues.
Bullish And Bearish Markets Explained Conclusion
The entire current year has been marked by a constantly bearish market, which is why a lot of cryptos have lost large amounts of their value. However, as always, the bears will retreat, and the new bull run will eventually arrive. In the end, the cycle will continue, as it always does.