What is a bear and bull market

• The terms bear and bull market have multiple possible origins

• All sorts of beasts have been dragged in to denote a type of trader

• Market sentiment drives the direction of a market

• Bitcoin is the market maker and has the most influence on bear and bull markets

• Bitcoin halving has historically set the stage for a violent bull market

• The end of a bull market can be found in Bitcoin's historical cycles

• If you want to profit from a bear and bull market you will have to use the clues from the market

• There is much to be gained from a bull market, although caution remains with the bear market that follows.

The origin of the terms bear and bull market

When we talk about the terms bull market and bear market, we see that they are English words that literally mean bear and bull market.

The bear attacks its opponents by raising itself very high and then slashing downward with its claws. This downward movement is a pictorial way of representing a downward graph.

A bull attacks his opponent by lowering his head and then pounding his horns upward. This upward motion is a pictorial way of representing an upward graph.

South Sea Company poem by Pope

The terms bull and bear appeared early on in a 1720 poem about the South Sea Company bubble by Alexander Pope:

"Come fill the South Sea goblet full

The gods shall of our stock take care

Europe pleased accepts the Bull

And Jove with joy puts off the Bear"

The South Sea Company was a company of the time that sold shares to the general public and artificially inflated them by heavily exaggerating the company's profitability. In a short time, the stock prices soared, then the dump followed and the prices collapsed. This was the first pump and dump scheme.

It is more than likely that this is where the terms bull and bear came from, since Pope is a very well-known poet.

Alternative explanations bull and bear terms

Another more commonly heard explanation is that bear hides in the 18th century were often sold by middlemen before the bear was shot. Those who sold the bear hides at that time assumed that prices would fall and were called bearish; those who bought the hides assumed that prices would rise and this eventually became the bull.

Possibly there is another earlier explanation, even mentioned by Shakespeare in "Macbeth" and "Much ado about nothing." This was about the always fun bull and bear game, where aggressive dogs were let loose on a bear or a bull and where there were rough bets on which beast would win.

At almost all major stock exchanges there is a bull. They usually just left out the bear. At Wall Street stands their world-famous bull:

Funny other beast markets

Besides the bears and the bulls, we also have the pigs.

A pig is a trader who wants to take advantage of all the trends. They want to earn as much as possible in as short a time as possible. They do this by betting on every trend with leverage. As a result, they constantly run high risks.

This has given them the expression "pigs get slaughtered". The problem with this method of trading is that there really are not such clear trends present at any time, so these traders often lose large sums of money or even everything in between as they get liquidated.

Then we have the chicken. These exhibit risk-averse behavior. They do want to get a piece of everything.

What these traders often do is close even the safest positions at the slightest opposition. As a result, they keep buying and selling and end up doing worse than the market because they make too little progress and any gains they make are gobbled up by trading costs.

We also have the sheep. These traders follow every market trend and when a coin suddenly goes up significantly, they buy it, only to sell it again when it collapses, and then repeat the pattern. Because they buy coins that have already gone up a lot, they have often bought coins too high and usually lose a lot of money. These sheep follow every trend from the crowd.

In a monkey market, you have a monkey throw a dart into a board and you buy the stocks or crypto he throws the arrow into. These monkeys have beaten the most reliable and content traders before, so maybe such a beast is worth the purchase. Although, of course, you can also throw your own, which is cheaper. Then you must not be able to aim too well, though!

What is a bull and what is a bear?

A bull is a crypto trader who capitalizes on rising prices. He buys crypto, leveraged or not, because he expects prices to rise. These traders can herald the beginning of a bull market.

A bear is a trader who capitalizes on falling prices. He sells his crypto or he goes short (leveraged betting that the market will go down) and can herald the beginning of a bear market by creating a lot of selling pressure.

What is market sentiment?

There is always a dominant movement in the market. Sometimes prices keep going up and there is a bull market. Sometimes prices just keep falling and there is a bear market. Market sentiment has a strong link to herd behavior. Selffulfilling prophecy also has a link to the start of a bear or bull market. When more traders start buying, it causes more interest and vice versa, which accelerates things. The swan sticking to principle.

It is also possible that there are no clear signals coming from the market and sideways movements keep coming. This could be called a stale market, a market that has fairly little movement. Some call this the bore market: a dull market in which there is little to gain except for day traders.

Market sentiment can even be followed live on the website where the "fear and greed index" in the crypto world is tracked.

Anxious markets

If there is fear in the market, prices will often continue to fall. We often speak of FUD: Fear, Uncertainty, Doubt. Traders are cautious about buying, influencers whine about how bad things are and that it will get much worse and there is the bandwagon effect. Sentiment is bearish they say, traders do not have a good feeling about the market and are not buying because of the downward trend of cryptocurrencies.

When many traders sell, there is more supply than demand. In such a market, prices will fall. Because of this falling market, even more people will sell, fearing that prices will fall even further. This and stop losses that are triggered will cause the price to fall even further, et cetera. This spiral can last quite a long time then we speak of the bear market. Institutional investors and whales are often the first to exit the market and have the greatest influence on this movement.

Positive market sentiment

When there is greed in the market you get the opposite. More and more buyers arrive, so demand exceeds supply. As a result, you get rising prices and this means bull market. Influencers are suddenly ecstatic and advise you to buy heavily, especially coins they own. The sentiment is bullish they say, traders then have a good feeling about buying cryptocurrency now.

As prices rise, many people get FOMO: Fear Of Missing Out. They don't want to be out of the loop and start buying. The spiral goes upward and such a bull market occurs.

The market cycle of cryptocurrency

There is a blueprint of a market cycle, indicating all the emotions or sentiments in the market. This applies to all markets, including the crypto market. This is called the Wall Street Cheat Sheet and is a well-known phenomenon that shows how markets work. It is very useful to take a look at it sometime:

As you can see if you have been participating in crypto for some time, your past disorders are included! The closer to euphoria, the higher your risks. The closer to anger and depression, the lower your risks. Financial tools like these can give you guidance in your analysis.

Historical bull and bear markets

The most famous bear market in the U.S. stock market was the Great Depression of 1929. It lasted until 1939 and stock prices fell 25% in two days, Black Monday and Black Tuesday in 1929. The successful Roaring Twenties came to an end and both bank runs and bankrupt companies were the order of the day. Financial markets jumped on tilt. Bull markets in stocks are pretty much the rule, with a brief bear exception here and there when there is another crisis. Japan is about the only exception to this.

Bitcoin the market maker

The bull market in cryptocurrency depends mainly on the price of Bitcoin. Bitcoin is the market maker, the market leader that takes all other coins in its wake, up or down.

This has to do with the Pearson correlation between Bitcoin and altcoins. In short, altcoins will follow Bitcoin because of the selling of crypto in pairs. If other coins didn't move with Bitcoin you could buy the market empty with Bitcoin or you could suddenly buy a lot more Bitcoin for altcoins.

Bitcoin dominance

By looking at Bitcoin dominance, you can see what phase we are in. If prices are rising and Bitcoin dominance is increasing we are in a bull market. If Bitcoin dominance is falling but the prices of both Bitcoin and altcoins are rising, we are in an altcoin season. At such a time, it is more advantageous to invest in altcoins than Bitcoin.

How has Bitcoin, the king, behaved in the past?

Bitcoin halving historic

Every time there had been a Bitcoin halving event we saw that some time after that halving the price of Bitcoin began to rise and, as a result, so did the price of altcoins. We will give a brief overview:

In 2012 was the first halving. The reward for finding a block went from 50 BTC to 25. Bitcoin's price went from 0 to 500 euros in 3 years.

In 2016 was the second halving. This was followed by a very long bull market, with Bitcoin's price soaring to 16,500. In early 2018, altcoin prices exploded with margins that were never repeated. Those who had bought altcoins back then and sold them at the right time are probably sitting pretty warmly today. Any monkey could earn a Lambo!

The third halving was in 2020. Bitcoin rose to around 60,000 in November 2021. Altcoins were doing pretty well until Bitcoin lost about half in one week in May, and altcoins took an equivalent hit. Bitcoin still went to an all time high after this, but altcoins did not recover. This is something to watch out for in the coming bull markets, though.

The fourth halving in April 2024 did have an unusual introduction: Bitcoin reached its all time high even before the halfway point. This made people hope for a very long bull market, but a deep slump followed, especially for the altcoins. Normally, the Bitcoin bull market will regain momentum especially after the summer, and until then it will probably be piecemeal if past patterns repeat themselves.

Bear markets

The bear markets are much less known. That's because people want to forget them quickly.

After a bull market reaches its peak, the descent into the Wall Street Cheat Sheet begins. Coins become worth less and less, and that can add up solidly. Many altcoins lose up to 90-95% of their value, so traders should sell their coins quickly after the bull market.

End of the bull market

But how do you know if the bull market is over? Maybe there will be a rebound and you will have sold all your coins. Well, you never know this for sure. But there is a very logical way to look at this, which means you may not have sold your coins exactly on time, but well within a margin.

So now you know that altcoins can lose as much as 90% or more of their value. Do you want to risk your coins losing value by such percentages? We didn't think so! There is a way to find out when the bull market is coming to an end, though: If you see advertisements for crypto everywhere, if you hear people everywhere talking about Bitcoin and co, if even your neighbor or colleague you've never heard talk about it before suddenly has crypto, then the end of the bull market is coming.

After all, a bull market is driven by purchases. If no more new investors come in to cough up the higher prices, prices will start to fall. After your colleague or neighbor, the only people left are those who will never buy even one cryptocurrency at all. The cake is over.

Patterns of Bitcoin's exchange rate

What certainly also helps is to zoom out on the price of Bitcoin. Look at previous cycles and you will discover patterns. Analyze those patterns well, because a bull market is driven by Bitcoin. Thus, you will see that a bull market of Bitcoin usually lasts about a year and comes to an end in the summer one year after the halving. Time for a crypto exit strategy! Try not to hope for a precise top to sell, but sell when you feel and are almost certain that he cannot last long. Then also stand by it and don't buy again.

In Bitcoin's earlier years, you also had intermediate bull and bear markets. Those times seem to be over, though. At the beginning of the bull market, you may still be able to switch a bit if you separate the stronger coins from the weaker ones or want to trade Bitcoin for altcoins.

This may seem a bit boring, but if you know that a bull market can last about a year and a bear market can last 3 years you can prepare for this. What you can still do during that time is staking stablecoins or fiat money to pay your taxes from or grow your stack anyway.

How do you profit from a bear and bull market?

The best way to profit from a bear market is to buy when all the sellers run out. The best way to profit from a bull market is to sell when all the buyers run out.

For this, we take ourselves back to a walk on Mount Wall Street. If almost everyone in the market is pessimistic, anger and depression, you should buy. When virtually everyone is euphoric you should sell.

"Be fearful when others are greedy and greedy when others are fearful."

Timing of the market cycle

You don't have to time the market perfectly, you can also roughly determine when these times have arrived, by looking at Bitcoin's max chart in CoinGecko and paying particular attention to past cycles and looking closely at the timing and patterns that led to the end of the bull market and the end of a bear market. For example, you saw a pattern from the technical analysis at the 2021 bull market emerged: the "Head and Shoulders." This was a bearish pattern and it has come true.

When Bitcoin was around 15,000 at the end of 2022, you could see in the chart that BTC hardly fell below this price, but not much above it for two months either. The bottom seemed to have been found and it turned out to be so.

The rough breakdown of 3-year bears and 1-year bulls can be helpful here. Somewhere in the bear market you will find Bitcoin's bottom. This is very difficult to determine, but you don't have to get it exactly right either. For example, you could get a Bitcoin for around 15,000 during the bear market in 2022. Even if it had fallen even further, this would have been a good buying opportunity. But then again, predicting the future is always more difficult than predicting the past.

There are also still traders who have the motto "time in the market is more important than timing the market." These traders believe that Bitcoin will have an ever-increasing price over time and therefore remain in the market with Bitcoin regardless of the price.

How to profit from a bull market most people understand. You buy a coin, wait for it to increase in value considerably and then sell it. With a bear market, this is much less clear.

Taking advantage of a bear market

In a bear market, you can use borrowed money to gamble on coins becoming worth less. They call that going short. But even in a bear market coins go up and down considerably. With a high leverage, from about 10x, this is a very risky business, because coins in a bear market may well experience a short rebound of 10% in one day, only to start their temporary decline again.

"My partner Charlie says there are only three ways a smart person can go broke: Liquor, ladies and leverage."

Those who are very good at timing the market may well take a gamble with this, but not at too much leverage. In general, we here at Anycoin Direct advise against leveraged trading. Trading with leverage requires a great deal of expertise and hedging risk is not everyone's cup of tea.

Dollar Cost Averaging

Another course of action is the Dollar Cost Averaging method. Here you put in an equal amount every period you choose, so you don't have to time the market at all. As a result, you will buy on average, some high and some lower, so the buying price cannot be too high. This is especially recommended for inexperienced traders, as someone who has cultivated a bit of background and substance, for example by reading our Academy, should be able to determine the buying moment quite reasonably, especially for Bitcoin in a bear market.

Bull market leverage risks

In a bull market you can also trade with leverage, but this is even more risky, because there are many more corrections and dips in bull markets than there are tops in a bear market. If you do it, do it with a smaller portion of your portfolio until you become an expert at it.

John Maynard Keynes, the famous economist, said the following about it:

The markets can remain irrational longer than you can remain solvent.

With this, John is simply saying that your money may be gone before the market starts doing what it should. So beware of leveraged trading if you are eager to continue playing this exciting game called, "Investing in cryptocurrency."

Characteristics of a bull market

• Crypto prices continue to rise

• Demand is higher than supply

• Swan stick to it, that is, the flock follows the price rises and proceeds to buy as well

• Declines are less severe in charts in technical analysis

• The peaks are higher and higher

• There is a lot of confidence in the market

• Sentiment is bullish

• There is more and more talk about crypto in the media, by influencers and on forums

• Intermediaries such as brokers and exchanges are widely advertised

• More and more people are getting into the market, especially the newbies

In a bear market, you will see the opposite.

Conclusion

Bear and bull markets hold the promise of making a lot of money.

Unfortunately, only the best traders will make the most of it, in addition to a bunch of lucky punks. The bulk of traders lose money, research shows.

So make sure you do a thorough analysis of bear and bull markets, then at least you will have done everything you can to be among the best traders.