Bear and bull are two terms investors use to describe how investment markets are performing – when the assets depreciate or appreciate in value. They define a rising market as a bull market, and a declining one as a bear market.
The crypto market is famous for its increased volatility and sky-rocketing price fluctuations, so the terms bull and bear are often used to describe longer periods of upward and downward movement.
It’s widely known that after the market goes through a bear market (as the one from 2022), it’ll head toward a bullish phase. It’s crucial for investors to identify these phases to know when and where to buy Bitcoin, enter or exit the market.
In recent months, several factors acted as positive catalysts for the crypto market, triggering spikes in crypto prices. Are they signs of a bull market? How can a beginner investor predict when a bull market is nearby?
Discussing about a bull market
As mentioned earlier, the term bull market is used to define a long period of rising crypto prices and overall positive sentiment surrounding the market. These times are usually characterized by high levels of investor confidence, which leads to significant value appreciation across the majority of digital currencies and enhanced buying activity.
Bull markets happen in favorable economic conditions, when the market is on the rise and the employment levels tend to increase. The crypto market usually experiences a more consistent and stronger bull phase than the other financial markets. The average scenario for a cryptocurrency evolution during the bull market implies an increase in price of more than 40% over 1-2 days. The crypto market is more volatile than traditional sectors because it’s smaller.
Factors that trigger a bull market
The bull market is the result of a cumulus of factors.
- Halving events. Bitcoin is the largest cryptocurrency by market cap and all changes it goes through, also impact the overall state of the market. It experiences halving events around every four years (when block rewards are cut in half), which transform it into a scarce asset and trigger spikes in price. The lower the supply of an asset it, the higher its price.
- Market sentiment. Bull markets are often sustained by a positive market sentiment and high investor confidence because they draw more actors to the industry. When the public has a positive perception of the crypto market, digital assets become the subject of institutional adoption, industry news is favorable, and the regulatory developments are positive. All these factors could lead to a bullish period.
- Institutional involvement. While the crypto market is decentralized (no government organization controls it), it still suffers value changes when large institutions take decisions regarding it. For example, when well-known corporations and institutional investors are involved in the sector and purchase digital assets, the public has the tendency to see the industry as more credible. The injection of large amounts of capital in the market will always trigger a bullish trend.
- Use cases and adoption. As expected, when crypto holders discover new practical uses for digital currencies, they become more interested in the assets. The sector went through a real-world adoption process lately, and experts predict that cryptocurrencies will experience a bull rush in the following months. Increased acceptance and utility are also associated with value appreciation and increased demand.
- Technological advancement. Blockchain technology is innovative and transformative, so any new project meant to provide the public with new features will attract investment and attention. Technological advancements in the blockchain sector are often correlated with price appreciation among cryptocurrencies and an overall market optimism.
The main phases of a crypto bull market
Crypto experts state that the crypto market reached its bottom in 2022 when the bear market was at its lowest point. In November 2022 Bitcoin fell to $15.000, the lowest price in a long period. However, since then the industry has shown signs of recovery, and all digital currencies, including Bitcoin spiked in price.
To help investors differentiate between bull and bear markets, it’s crucial to identify the main phases of a bull stage.
- During the first phase of a bull market, funds tend to flow into Bitcoin because it’s the largest cryptocurrency by market cap and the most stable one. Investors usually notice that Bitcoin’s value is slowly rebounding, and they allocate more funds towards the asset. Bitcoin is the main asset of the crypto market, and it’s only normal for retail and institutional investors to first turn their attention towards it. This will only trigger further spikes in its price.
- After investors add Bitcoin to their portfolios, they look for ways to diversify it to lower the risk associated with investing in a single asset. Ethereum is usually the second cryptocurrency they purchase, and once they turn their attention towards it, the second phase in the bull market starts. Ethereum is the second largest cryptocurrency by market cap and the platform that hosts the largest DeFi and Metaverse projects.
- During the third phase Ethereum outperforms Bitcoin, and investors start purchasing other large-cap digital currencies. Large-cap assets work as a safety net for the investors who want to make a profit during the bull market, but are cautious due to its increased volatility.
- During the altseason smaller digital currencies outperform the large-cap digital currencies. Investors purchase all kinds of coins, even meme coins because they want to take advantage of whatever opportunity the market might offer.
It’s crucial to highlight that these stages don’t follow one after another, they often overlap. At the moment, the first and second phases coincide, and experts predict that the altseason will soon follow. Research shows that the second quarter of 2023 overlapped with a memecoin season and numerous meme coins registered significant price increases.
What you should keep in mind
It’s recommended to enter the bull market during the initial phase when the prices are still low. However, as a beginner investor it might be challenging to identify the start, and therefore you should keep an eye on the crypto dedicated platforms.
