Cryptocurrencies are infamous for their high volatility, which can be both a good and a bad thing depending on who you ask. On one hand, it offers high risk and high reward, while on the other, it can lead to significant losses. As a result, the term "bull vs bear" has become popular among traders to describe market trends, and the ability to analyse these two states has become a survival skill for investors to predict future scenarios and gain or protect their funds.
In this article, we will discuss how to identify a crypto bull market to help traders avoid portfolio losses.
What is a Bull Market?
A bull market is defined as a period of time in which the majority of investors are buying. During a bull market, demand for assets exceeds supply, market confidence is high, and prices are rising. Investors who believe that prices will increase over time are referred to as "bulls."
The term "bull market" is usually reserved for extended periods in which a large portion of security prices are rising. These markets tend to last for months or even years. Bull markets generally occur when the economy is strengthening or already strong, and often coincide with a rise in corporate profits and a reduction in unemployment. Investor confidence also rises during this time, and the overall demand for stocks is positive, along with the overall tone of the market.
Bull vs Bear Market Psychologically
It's not easy to consistently predict when trends in the market might change. This is partly due to psychological effects and speculation that may sometimes play a large role in the markets.
However, there are certain indicators that investors can use to determine whether a market is bullish or bearish. These indicators include market breadth, market sentiment, and technical analysis. Also, be careful of some bear traps when the price start to break below important levels.
Market Breadth
Market breadth refers to the number of stocks that are advancing versus declining. During a bull market, the majority of stocks are advancing, while during a bear market, the majority of stocks are declining.
Market Sentiment
Market sentiment refers to the overall mood of investors. During a bull market, investor sentiment is positive, while during a bear market, it is negative.
Technical Analysis
Technical analysis involves studying charts and using mathematical indicators to determine the direction of the market. Some of the technical features are discussed in the following section
Bull vs Bear Market Technically
Professional traders often define a bull market as a rise of over 20% in the price occurring between two declines of 20%. On the other hand, a bear market is a situation where a decrease of more than 20% takes place after a rise of 20% and before another 20% rise. A bullish trend is a sign to buy, as you may want to pick up more, while a bearish trend is a warning to sell before the market falls into a slump.
Resistance and Support Levels
Resistance refers to a level at which a bullish trend is expected to bounce, while the support level is where bearish trends are projected to halt. These two indicators are demonstrated by flat lines in the chart and are important to recognise remarkable points throughout the price movements.
Reading Candlesticks to Predict the Future
Candlesticks are a popular tool for traders to predict future market movements.
There are several common scenarios that candlesticks can describe, depending on their type. For instance, the hammer type with a green bowl on the top of the line indicates that the market is moving down sharply before recovering at the close.
The inverted hammer candlestick, on the other hand, has a bowl sticking to the bottom of the line, implying that the price underwent both an uptrend and a downtrend in one session and has now begun to move up a bit.
The bear on the top is called a hanging man, which occurs when a recession is starting to take place after the price rose to the highest point in the session. The shooting star candlestick, however, is a bear lying in the bottom, showing a severe decline to a lower point compared to the opening price.
Head and Shoulders
Market scenarios known as head and shoulders and the reverse head and shoulders are another tool for traders to predict market trends. A head and shoulder scenario shows a pattern in which a bullish trend is turning bearish, resembling a big head and two shoulders on the head sides. The reverse head and shoulders pattern, on the other hand, gives a forecast for an uptrend, with the neckline being the signal to buy. In short bull vs bear = inverse vs normal head and shoulders
Bullish? But Take Caution
When the prices are shooting up, it's hard to even fathom that they will ever come back down. Investors get consumed by euphoria and continue to wait until they have earned enough money to retire and never work again. However, huge speculative price increases are largely unsustainable.
Whether you are a holder or a trader, it's best to take periodic profits. Sure, you might miss out on some larger gains, but you will also lock in some profits, something many traders fail to do. Remember, profits only exist once you realise them.
Always remember these four things -
1. The Hype Machine Doesn't Care About You
It's not only leverage that you should be aware of and how it may turn on you at any second. It's the coins themselves that can go from the highest high to zero within seconds.This is a perfect time for dodgy individuals who have been pumping coins through influencers and other marketing methods to exit and realise their own paper gains on coins they created specifically to separate you from your money.
2. It's Never Been a Better Time to Do Your Own Research
Be wary of the news and coins that are being shilled on Twitter, Reddit, Our Crypto Talk and other platforms. When investing in a coin or token, see what kind of project it is and if there's actually going to be some good value behind it. Always Do your own research and use information to back your decisions and not making them.
3. Never Confuse Genius With Luck
It's very easy to make money in a bull market, and much harder to do the same during a bear one. The greatest trick the bull market plays on new investors is making them think luck. However, luck runs out eventually, and it's essential to understand the fundamentals of the cryptocurrency market. While it's true that some people have made a fortune through sheer luck, most of the successful traders have done their research, made calculated risks, and had a strategy in place.
4. The Bear Market Is Coming
As the saying goes, all good things must come to an end, and the same goes for a crypto bull market. Nobody knows when it will end, but one thing is for sure: the bear market is coming. Therefore, it's essential to have a plan in place to mitigate your losses when the market starts to fall. One of the best strategies is to invest in projects that have strong fundamentals
Conclusion :
As with any investment, it's important to do your own research, understand the risks involved, and make informed decisions. While identifying a bull market in crypto can be a valuable skill for traders, it's important to approach it with caution and not get caught up in hype or speculation. With the right knowledge and a level-headed approach, crypto investments can offer high potential returns and be a valuable addition to any portfolio. So stay informed, stay vigilant, and always remember to take profits when the time is right.
FAQs :
Que. What is a bull market in crypto?
Ans . A bull market is a period of rising prices and optimistic sentiment in the crypto market.
Que. What is a bear market in crypto?
Ans. A bear market is a period of falling prices and pessimistic sentiment in the crypto market.
Que. How can you tell if the crypto market is in a bull vs bear phase?
Ans. The overall direction of prices and trading volume can be indicators of whether the market is
in a bull vs bear phase.
Que. Are bull markets good for crypto investors?
Ans. Bull markets can provide opportunities for investors to make profits by buying low and selling high, but they also come with higher risks and volatility.
Que. How long can bull or bear markets last in crypto?
Ans.Bull and bear markets in crypto can last for varying lengths of time, ranging from a few months to several years, depending on a variety of factors such as global events, technological developments, and regulatory changes.