What exactly is a crypto bull run? How does it differ from a bear market? And why should you care?
A crypto bull run occurs when the price of a particular coin or token increases rapidly.
This usually happens during times of optimism and growth within the crypto community. The opposite is called a bear market.
Bull runs happen because investors see a new opportunity and want to get in early. They believe that the value of their investment will increase over time.
Bear markets occur when investors become concerned about the future of the crypto market.
They start selling off their coins and tokens at lower prices, causing the overall value of the market to decrease.
We have put together this guide to help you understand bull runs and bull markets, so keep reading to find out more.
What Is A Bull Market?
First things first: what is a bull market? Well, according to Investopedia, “a bull market is an economic cycle characterized by robust economic expansion, rising stock prices, and low interest rates.”
The term was coined in 18th century France to describe a period where farmers were able to sell their crops for higher prices than they had paid for them, which led to increased profits.
The term has since been used to describe any situation with high demand and low supply. A rising market means more investors and a sustained increase in prices.
This can be very beneficial as the economy becomes stronger and employment levels rise.
Cryptocurrency markets are smaller and more volatile than traditional markets. This means they could fluctuate more often and more drastically.
This will continue as long as demand exceeds supply, and then the market will shift towards a bear market when investors begin selling off their coins.
How Does A Bull Market Start?
A bull market is started by the investors. If they spot sustained rising prices then they begin to buy stocks in the hopes that the price will continue going up and they will make a good return.
The steady flow of investments helps to drive the prices up further so they carry on rising.
But what else can kick start a Bull Market? Certain other factors can contribute to an emerging bull market.
Favorable market conditions also help to give investors confidence – low rates of unemployment, a strong gross domestic product, and other factors that also influence traditional markets.
As crypto markets are much newer than traditional markets and they have many differences, they have their unique driving forces.
Popular culture, social media support, and mainstream tastes have a strong influence over what happens to the crypto market.
Larger institutional investments in cryptocurrency also push the market in certain directions, as does support from traditional financiers.
What Are The Typical Characteristics Of A Bull Market?
There are certain characteristics of a bull market that are easy to spot:
- A sustained increase in price over a period of time
- Strong demand regardless of weak supply
- Confidence in the market from investors
- Certain stocks being overpriced
- Mainstream media giving more attention to cryptocurrency
- Popular culture feeding a public interest in cryptocurrency
How Do You Tell When A Crypto Bear Market Ends?
Crypto bulls are often very optimistic when it comes to predicting how far the market can go. However, many factors influence whether a cryptocurrency is going up or down.
One factor is the number of transactions happening on a network. If all these transactions are coming from one place, then it could be considered as a sign that the blockchain is growing.
However, if most of the activity is coming from just one country, then it could be a sign that the currency is being traded heavily in one region.
Another important indicator is whether the price of a coin is increasing or decreasing. If the price is dropping, then it may indicate that the market is losing confidence in the project.
If the price is constantly increasing, however, it could mean that people are buying into the idea of the project and its potential.
When Will We See A Crypto Bull Run?
There is no set date that we know of when a bull run will begin.
It depends on several different factors, including the current state of the economy and the general public perception of cryptocurrencies.
It also depends on how much support the projects themselves receive. For example, if a lot of people buy into a certain project, then it could lead to a bull run.
However, if only a few people invest in a project, then it might not have enough momentum behind it to sustain itself.
The good news is that the bull run doesn’t necessarily need to last forever. Some experts say that a bull run should end once the market reaches its peak.
How Does It Impact The Economy?
As noted earlier, a bull market is good for the economy or can be instigated by a strong economy. Bull markets are characterized by good employment rates and a great economy.
Bear markets are the opposite. They are not good for the economy- people don’t spend money, businesses make less profit, and the result is that investors are much more hesitant.
Trading dries up and the bear market continues for a period of time.
Investors Outlook
The performance of the crypto market is closely linked to the psychology of the investors.
When the economy is good and there is a bull market, this is usually driven by the confidence of the investors which continues to grow with the positive performance of the market.
More investors feel encouraged to invest as well as they see the profits of others.
On the other hand, investors lack confidence in a bear market which is why they begin to sell off their coins. Profits continue to fall, and the lack of confidence spreads to other investors.
Summary
Bull runs, bull markets, and bear markets – it all sounds quite complicated, to begin with, but once you understand the basics you will be able to recognize these occurrences in the crypto market.
