Bull market vs Bear market

- 10 minute read

Kevin van der Linden
Digital Marketeer
Kevin van der Linden

As a (potential) investor in cryptocurrencies, terms like bull market and bear market are very important. These terms indicate whether the crypto market is in a rising or declining trend. So what do these terms actually mean?

bull market vs bear market

What is a bear market?

Bear market is a term used in the crypto world to describe a strong downward market trend. A downward market trend is indicated by significant decreasing prices over a relatively short period of time.

A bear market usually begins when a sense of pessimism arises among investors, resulting in a fall in prices and a loss of confidence in market prices and indexes. In response to the pessimistic market sentiment, pessimistic investors, also known as 'bears', start selling their shares. These bears ensure that this vicious circle continues until the market finds itself in a crisis, in which the majority of investors have made a loss on their investment.

Due to the fact that the cryptocurrency market is still relatively small, it is extremely volatile. Therefore, bear markets in the crypto world are more severe and longer lasting than in traditional financial markets such as stocks and bonds. One of the heaviest bear market in crypto history started in January 2018 and saw cryptocurrencies lose up to 99% of their value.

What is a bull market?

The counterpart of a bear market is the bull market. This term is used in crypto to refer to the strong bull market. This strong upward trend is characterized by rapidly rising prices.

A bull market tends to start when investors are optimistic about the future prospects of an asset or of the market as a whole. The market recovers slowly and the overall level of consumer confidence keeps increasing. More and more investors, also known as the bulls, enter and the market continues to rise. There are several external factors that play a role in creating a bull market in crypto. These include regulations and the economic situation of major nations, such as the United States, Europe and China, and many more factors.

During a bull run, it' s common for currencies to rise tens of percent within a few days and occasionally a few hours. At the end of a bull run, it is possible that some cryptocurrencies have risen more than 10,000% during the entire cycle.

History of the bull and bear market

Like the global economy, the crypto market fluctuates between bull and bear markets. In the crypto markets, these cycles tend to be much shorter than in most economies.

There have been three cycles in the early history of crypto. From 2009 to 2014, the price of Bitcoin flourished, reaching a peak of around $1,200 in November 2013. After reaching this all-time-high, the value collapsed completely and the price corrected to below $200, which meant a drop of around 86%.

Bitcoin remained in a bear market until September 2015 where the price did not fluctuate much. After 2015, the price of Bitcoin slowly started to rise again. Starting in September 2015, it took Bitcoin just over 500 days to match its all-time-high of $1,200.

At that time, the crypto market started to grow along with other cryptocurrencies, called altcoins. Cryptocurrencies gained more attention from the public and a true bull run ensued. From late 2015 to late 2017, the value of Bitcoin increased by about 6,000%. Other cryptocurrencies such as Ethereum, Litecoin and NEO also rose furiously during this period. Cryptocurrencies were more bullish than ever.

But as Murphy's Law dictates, everything that can go wrong, will go wrong one day. And that is what happened in January 2018. The crypto market was overheated and a wildly rapid decline in value began, initiated by the bears. The entire crypto market fell in one year from a market capitalization of around $660 billion to $87 billion. A drop of 88%.

After a relatively small crypto upswing, it suffered another blow during the Corona pandemic. The entire market dropped from $300 billion to $100 billion within one month!

However, as mentioned before, cryptocurrency cycles are (up to now) of short duration. Partly due to the enormous supply of potentially good crypto currencies, a hype was created after the impact of the Corona pandemic. Many coins have flourished in the past year and have risen by hundreds to thousands of percentages. Bitcoin was even the first crypto to reach a market value of over 1 billion dollars.

Are we currently in a bull or bear market?

Many crypto currencies went up in an upward trend until May. In May itself came a major correction which saw the value of many crypto currencies drop by more than 50% in a matter of a few days. Nevertheless, the value of many currencies bounced back during August and September. Therefore the most important question: are we currently in a bull or a bear market?

As a benchmark, we will use Bitcoin to determine what kind of market we are in at the moment. After all, Bitcoin is the very first cryptocurrency and has the highest market value of all cryptocurrencies. Because of this, most currencies follow the Bitcoin trend. If Bitcoin's value rises, altcoins will rise with it, and if it falls, altcoins will fall with it.

Bitcoin has had a massive surge in value since the COVID-19 pandemic. Within 400 days, the value rose from $3,720 to $64,865, an increase of more than 1600%. The overall trend has thus been completely bullish for a little over a year and we are therefore talking about a bull run.

In the middle of May, Bitcoin experienced a sharp correction. Every bull run has corrections because no share goes up forever. However, the correction in May was never as effective as this one. In nine days, the price of Bitcoin fell by 50%. In the following days, the price slumped further. The entire crypto market of more than $2.5 trillion plummeted below $1 trillion. In the history of crypto, such a correction has never happened before.

Meanwhile, the price of Bitcoin is recovering and many altcoins are slowly flourishing again. As a result, you can see a split in market sentiment. The bulls are slowly believing in a market resurgence and expect Bitcoin to break through its all-time high and possibly fly to 100k in the coming months. The bears remain pessimistic until Bitcoin breaks through its all-time high.

With the crypto market bouncing back and nearly returning to the levels seen in May, it is difficult to determine whether we are in a bull or bear market. It seems that we are in an intermediate phase where the bulls and the bears are competing against each other for which direction to go.

Want to know more about our portfolio?

Check out all our 'Cryptocurrencies.