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Ever heard the term “bullish” used in crypto? It refers to the bull market. Now, what is the bull market in crypto? In this article, we’ll look at what it is, an example and tips for surviving.
What is The Bull Market in Crypto?
A bull market, also known as a bull run, occurs when prices on a financial market are rising or are expected to rise. During this time, most investors are buying, supply outweighs demand, market confidence is high, and prices are rising.
The term “bull market” is not only used in cryptocurrency but it’s also used in real estate, stocks, and other assets.
If a market index rises an average of 20% or more over two months, investors consider the trend to indicate a bull run.
During bull markets, there is optimism, investor confidence, and an expectation of strong results continuing for a long time.
There is no particular way to predict when the crypto market trends might change, and this is because there is no specific measurement for it.
What Causes a Bull Market?
A simple answer to what causes a crypto bull run, investors. But how do they cause it? A bull run happens when crypto investors feel there is going to be an increase in the price of cryptocurrencies, so they buy more at low prices which then creates demand and causes the increase in value.
Asides from this, there are other factors which cause a bull run in the crypto.
- Support from pop culture and mainstream media.
- Introduction of institutional capital
- Unique events that threaten the traditional financial market: COVID-19, for example, drove a lot of people to turn to crypto during the time of the stress caused by the pandemic on the traditional financial markets.
- Growing optimism from traditional finance: Strategists from JPMorgan said Bitcoin could rise to as high as $146,000.
Features of a Crypto Bull Market
- Increase in prices over a period of time
- Strong demand in spite of weak supply
- Increase of investor confidence in the market
- Overpricing of certain projects
- Insertion of talks about cryptocurrency in mainstream media and pop culture as well as social media
- Increased general interest in crypto among celebrities, influencers and others who might not have been interested in cryptocurrency before
Example of a Bull Market
An example is during the period between December 2011 and March 2015 in Indian stock markets where Sensex surged up by more than 98%.
Another notable bull market in recent history was the period between 2003 and 2007. During this time, the S&P 500 increased by a significant margin after an earlier decline; as the 2008 financial crisis took effect, major declines occurred again after the bull run
Tips To Survive in a Bull Market in Crypto
1. Buy and Hodl:
This is one of the most key strategies in investing. It is the process of buying a cryptocurrency or more and holding onto it, to potentially to sell it at a later date. In this strategy, this is where investor confidence comes in.
2. Increased Buy and Hodl:
This is a different type of the buy and hodl strategy mentioned earlier. In this strategy, you continue to hold on to your crypto as the prices get higher. This involves additional risk.
According to this method, an investor will buy a fixed number of additional shares for every increase in the stock price of a predetermined amount.
3. Full-Swing Trading:
It is likely that the most aggressive way to capitalize on a bull runis through full-swing trading, in which investors take very active roles, using short-selling and other techniques to try to squeeze out maximum gains during market shifts.
There is a history of bull markets ending and investors beginning to lose confidence at some point, whether it is due to bad news like a new law or the COVID-19 virus pandemic. A sharp downwards price movement begins what we call a bear market.
Bull markets are prone to fluctuations, dips, and corrections along the way, so it can be easy to misinterpret short-term downward movements as the end of the bull market. Considering longer-term price action is a good way to recognize any potential signs of a trend reversal.