The Trend is Your Friend Until It's Not

“Bull” and “bear” are typically used to describe how stock markets are performing — whether they are appreciating or depreciating in value. In this context, a rising market is called a bull market, while a declining one is called a bear market.



Given that the crypto market is generally volatile and fluctuates on a daily basis, these terms are used to refer to longer periods of either mostly upward or downward movement. Likewise, changes in markets are indicated by substantial swings (at least 20%) in either direction.

We will start with the bull market because we like it, it brings us profits and makes us feel more confident.


What is a bull market?


A bull market refers to generally favourable economic conditions. It means that a market is on the rise and is also usually accompanied by positive investor sentiments concerning the current uptrend.

The term “bull market” is believed to have originated from a bull’s fighting style, wherein it attacks its opponents with its horns in an upward motion. Today, a “bullish” market or investor usually connotes optimism concerning an asset’s continued rise in value.


In the crypto market, the charging bull heralds a bullish phase for cryptocurrencies. Here, you’ll observe cryptocurrencies growing in value with generally favourable economic conditions and optimistic investors looking to make the most of their rising crypto portfolios.


Briefly put, the investor starts bull markets through the purchase of securities. This can also be done with fiat currency, as bullish markets typically raise the price of securities. The bull market goes on for as long as supply is exceeded by demand. After a while, the bull gets tired, so to speak, and the market shifts and turns into a bear market.


Characteristics of a crypto bull market


Increased prices over a sustained period of time;

Strong demand despite weak supply;

Increased investor confidence in the market;

Overpricing of certain projects;

Insertion of talks about cryptocurrency in mainstream media as well as social media;

General interest in cryptocurrency among celebrities, influencers and other sectors who might not have been interested in crypto before;

Hard rise of prices in the event of good news;

Bear market isn’t sound very good, but if you want to know how to make money even though the market doesn't have a good period, stay with us.


What is a bear market?


Bear markets are defined as a period of time where supply is greater than demand, confidence is low, and prices are falling. Pessimistic investors who believe prices will continue to fall are, therefore, referred to as “bears.” Bear markets can be difficult to trade in — particularly for inexperienced traders.


It’s notoriously difficult to predict when the bear market might end and when the bottom price has been reached — as rebounding is usually a slow and unpredictable process that can be influenced by many external factors such as economic growth, investor psychology, and world news or events.


But they also can present opportunities. After all, if your investment strategy is longer-term, buying during a bear market can pay off when the cycle reverses itself. Investors with shorter-term strategies can also be on the lookout for temporary price spikes or corrections. And for more advanced investors, there are strategies like short selling, which is a way of betting that an asset will decline in price. Another strategy many crypto investors employ is dollar-cost averaging.


Characteristics of crypto bear markets


Decreasing prices over a sustained period of time;

Supply is greater than demand;

Lack of investor confidence in the market;

No talk (or negative talk) of cryptocurrency in mainstream media as well as social media;

General distrust in cryptocurrency among economists, analysts and traditional finance;

Lower highs in the event of good news;

Lower lows in the event of bad news.


You can make a profit on both trends, but the question is how? Using long or short positions.

These two terms reflect whether a trader believes a cryptocurrency is going to rise or fall in value.


Cryptocurrency traders often use industry-specific jargon that is not fully understood by newcomers. While “longs” and “shorts” are not the most technical terms — in fact, they are at the core of trading — we’ll explain the two concepts, especially for newcomers, who are likely flooding the crypto market amid the devaluation of fiat currencies due to aggressive stimulus backed by governments and central bankers.

Long and short positions reflect the two possible directions of a price required to generate a profit. In a long position, the crypto trader hopes that the price will increase from a given point. In this case, we say that the trader “goes long,” or buys the cryptocurrency. Consequently, in a short position, the crypto trader expects the price to decline from a given point — i.e., the trader “goes short,” or sells the cryptocurrency.


While buying and selling is typical for spot exchanges, you can go long or short on a cryptocurrency without actually buying or selling it. This is possible on derivatives exchanges that offer futures, options, contracts for differences, and other derivatives products. When you trade these derivatives, you get exposure to cryptocurrencies via long and short positions but without “physically” owning or dealing with them.


That being said, you will see more long positions versus shorts in a bullish market, as more traders want to benefit from the price ascension. When the market is bearish, short positions generally exceed the long ones. However, this is only an observation and not a rule to follow. Professional traders and investors usually buy the dips and sell the rips — i.e., they open long positions when the price retreats from recent peaks and sell the cryptocurrency when the price tests resistance levels.


KEY TAKEAWAYS

Always think in terms of future potential—you can't do anything about the past, so stop clinging to it.


A selling strategy that's successful for one person might not work for somebody else.

Once we own something, we tend to let emotions such as greed or fear get in the way of good judgment.


It's important to think critically about selling; know your investing style and use that strategy to stay disciplined, keeping your emotions out of the market.

Remember, the most important thing is not to fall prey to emotions, do not sell if you are in the red zone, and do not put all your money in crypto even if they have "discounts".

Stay informed, form a well-defined strategy and follow that.

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