Professionals in corporate finance refer to markets as being bullish and bearish based on positive or negative price movements.Here we explain these terms and tell you what to do in each situation.
What is a bull market?
When the cryptocurrency market soars over a period, we call it a bull market in which prices are rising or are expected to rise.
A bullish trend is characterized by long strategies which show strong demand and weak supply for securities.
The majority of traders are full of optimism and positive growth. They are ready to hodl their cryptocurrencies and sell high as soon as the price will reach its peak.
There is no specific metric to find out if it is bull market or not. The most common definition of a bull market is a situation in which price increases 20%, usually after a decline of 20% and before a second 20% decline.
What is a bear market?
The bearish markets means the opposite of bullish ones. It is a market in which prices are falling and encourages traders to sell their cryptos. The demand is significantly lower than supply so prices slide down.
Bearish trend is characterized by heavy pessimism about the declining market prices scenario, low trading activity, and short strategies.
In that case users are concerned about the situation: the price has reached its peak and it will probably fall sharply. They start leaving the market and selling their crypto in order to avoid losing money from the falling prices. They come back when the bear trade is over, and buy the dips.
Unlike bull market, bear market can be marked by a 20% downturn from recent highs.
How should we act during bullish and bearish markets?
The best way to take advantage of the bull market is to select the long strategy, buying the cryptocurrency as early in the trend as possible, and then selling cryptos if they have reached their peak with a higher probability of making profit.
During the bear market, you may lose lots of your assets, because your they are losing their value and the end of bear trend is not clear. Additionally, if traders invest during this period, they can take a loss before any turning point appears.
Most crypto users are shorting at this time, but the important key here is not to miss the point on when to buy back when the market starts to turn around.