The phrase “bull market” describes a positive price trend in a market. This term is widely used not only in the realm of cryptocurrencies but also in conventional markets. A bull market is a significant uptrend characterized by substantial price increases over a relatively brief period. The cryptocurrency markets are smaller and more susceptible to volatility than traditional markets. As a result, it’s not unusual to witness robust and sustained bull markets, where price surges of 40% within a day or two are fairly typical.
While the phrase “bull market” may be generally applied to describe any robust market activity, it is commonly used in conventional markets to denote a situation where the value of an asset increases by 20% or more from its prior low. Usually, a bull market emerges when investors have a positive outlook on the future performance of an asset or the broader market indices.
Historically, several elements have played a role in the rise of a bull market. In conventional exchange markets, a robust gross domestic product (GDP) and minimal unemployment rates are among the factors that typically generate positive market conditions, boosting investor confidence. These elements can also indirectly influence the cryptocurrency markets. However, given that the crypto sector is a smaller niche, it often exhibits unique behavior and does not always align with traditional markets or economic indicators.
A bullish trend is typically signaled by a 20% rise in market prices, but most indications of an upcoming bull market are more complex. Traders and analysts employ various tools and systems to identify these signals and trends. Some examples of these technical analysis indicators are moving averages (MAs), Moving Average Convergence Divergence (MACD), the Relative Strength Index (RSI), and the On-Balance Volume (OBV).
Bear vs. Bull Markets
A bear market, the antithesis of a bull market, occurs when investors adopt a pessimistic outlook. This bearish trend, characterized by declining prices, fosters a negative market sentiment. As traders’ confidence dwindles, they are inclined to sell increasingly, leading to a further drop in prices and frequently resulting in what is referred to as capitulation.
According to financial analysts, from 1929 to 2014, the US experienced 25 bull and 25 bear markets. The average loss during bear markets was approximately -35%, whereas the average gain during bull markets was around +104%. These patterns demonstrate how market momentum maintains consistent price rises (in bull markets) and falls (in bear markets).
