Over the most recent few years, Crypto trading has gained a great deal of fame. It has come to be viewed as a simple method for getting rich rapidly. Crypto markets are extremely volatile and can be very profitable, but any form of market trading comes with its own set of risks.
If you’re new to the world of trading, especially in terms of crypto trading. You’ve probably heard people use the terms “bulls” and “bears” very often, and while these terms analogically have some resemblance to these animals, they’re not about them. Then what do they even mean? And why do investors shout HODL and FUD during one and ‘Bitcoin to the moon during the other? The Wall Street jargon might confuse you at first, but it’s simpler than you think. Markets thrive on trends and the best an investor can do is identify one. In this article, we’ll explain the signs of bear and bull markets in crypto.
What is a bull market?
A bull market, or bull run, is defined as a period of time where the majority of investors are buying, demand outweighs supply, market confidence is high, and prices are rising. If in a given market, you see prices quickly trending upwards. This could be a sign that the majority of investors are becoming optimistic or “bullish” about the price increasing further, which may mean that you’re looking at the start of a bull market.
Strategies used in Bull Cryptocurrency Markets
Traders generally prefer to “go long” during bull runs as prices are moving upwards. A long position refers to buying an asset with the expectation that the price will rise. In the cryptocurrency market bull run, traders generally prefer the buy and hold strategy. It is an investment strategy where traders buy an asset, expecting that the price will move up over a longer period of time.
Another strategy used by traders during bull markets is Dollar Cost Averaging (DCA). In DCA, traders buy small amounts of assets at regular intervals instead of investing the entire amount with one trade. This strategy enables traders to access a lower average purchase cost of an asset since even the bull markets will experience consolidation in prices.
What is a bear market?
A bear market is defined as a period of time where supply is greater than demand, confidence is low, and prices are falling. Pessimistic investors who believe prices will continue to fall are, therefore, referred to as “bears.” Bear markets can be difficult to trade in, particularly for inexperienced or new traders.
It’s notoriously difficult to predict when the bear market might end and when the bottom price has been reached. As rebounding is usually a slow and unpredictable process that can be influenced by many external factors such as economic growth, investor psychology, and world news or events. But they can also present opportunities.
Strategies Used in Bear Cryptocurrency Markets
Fundamental and technical analyses are usually used to predict upcoming trends in the crypto markets. Technical indicators like Moving Averages (MA) and the Parabolic SAR aid in recognizing market trends. Traders apply position to ‘go short’ during bear markets as the prices are moving downwards. And if your investment strategy is for the long term, buying during a bear market can pay off when the cycle reverses itself. Investors with shorter-term strategies should also be on the lookout for temporary price spikes or corrections. And for more advanced investors, there are strategies like short selling, which is a way of betting that an asset will decline in price.
Another strategy that many crypto investors employ is dollar-cost averaging, in which you’d invest a set amount of money (say $50) every week or month, whether the asset is rising or falling. This distributes your risk and allows you to invest through bull and bear markets alike.
In this article, we comprehensively covered the various conditions of bull and bear markets in cryptocurrency trading. We additionally examined different techniques that can be carried out to upgrade the cryptocurrency trading experience. No doubt, both bull and bear markets provide opportunities for profits conditioned upon the strategies that need to be implemented.
At the same time, it is essential to minimize risk elements irrespective of market trends. Cryptocurrency markets are highly volatile, and it is necessary to conduct thorough due diligence before investing.
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