This is an investor’s guide on what the crypto bull and bear market is and how to benefit from such trends in the digital currency market.
As of 2021 January, the digital currency market capitalization has crossed $1 trillion. The improvements in the crypto space are developing at a quick pace. It is receiving attention from the biggest FinTech providers who now provide access to digital currencies and investors who wish to own crypto assets and include them in their portfolios. Despite the increasing adoption, ideas from traditional financial space are available for digital currency space as well. That is the case in point: the crypto bull and bear market.
Trends of the market like the bear and the bull market illustrate the overall route of a digital asset or the digital currency market as a whole. Expert traders closely evaluate all these trends to define their strategies of trading. It is possible for the crypto traders to earn profit from the bull or bear digital currency market, provided they evaluate the trend in advance. In this blog, we will explore the definition of both bears as well as the bull market in the crypto space.
Crypto Bear And Bull Market: The Bull Market Meaning
A bull market is also termed a bull run. It is a state of the market with increased trends within a specified period of time. While the phrase is originally from the stock market, it is also used to define the market condition in other financial markets like the forex, and now digital currencies. In crypto, the bull run is also termed for specific assets such as BTC. In other words, when the value of Bitcoin is trending in an upward direction.
While bull markets imply uptrends, it does not inevitably imply that values don’t fluctuate. However, the trend on a longer time frame is positive or on the upper side. Hence, a bull market may have decreases or consolidation in assets’ prices but the overall shift is in an uptrend. One of the dimensions in illustrating the bull market is the time frame taken into account. Moreover, illustrating a market trend with increased time frames, in months or years, has increased validity when compared to lower time frames.
Being ‘bullish’ implies the overall feeling of investors who predict the price of an asset or digital currency market to increase. It does not refer to the state of the industry, rather it denotes the prediction of the market shifting in an upward direction.
Strategies Used in Bull Cryptocurrency Markets
Traders mainly like to ‘go long’ at the time of bull runs as values are moving upwards. A long position implies purchasing an asset with the anticipation that the price will increase. In the crypto space bull run, traders usually prefer the purchase and hold strategy. It is a type of investment strategy wherein traders purchase an asset predicting that the price will shift up in a longer frame of time.
Another strategy that is being used by traders during crypto bull markets 2021 is the DCA (Dollar Cost Averaging). In DCA, traders purchase small amounts of assets at routine intervals in place of investing the complete amount with one trade. This strategy allows traders to access a lower average buying cost of an asset since even the bull markets will encounter integration in prices.
Crypto Bear And Bull Market: The Crypto Bear Market Meaning
In the crypto bull and bear market, let us see what a bear market is. In crypto, a bear market is a market condition with a downward trend within a specified period of time. LIke bull market, a bear market can also be availed for some assets like Ethereum, Bitcoin, and many more. Trading in the bear market when compared to the bull market can be difficult and complex for beginners in crypto trading.
Along with that, in some scenarios, price decrease during bear markets can be quite fast and steep. As the market is shifting in a downward trend, there are many traders who exit their positions, which at times leads to mass liquidation. This takes the market to move more down and more sellers who try to exit the market.
However, at the same time, with great strategic moves, investors have options to generate profits by trading in bearish market scenarios. Being “bearish” implies to the general sentiments of the investors who predict the value of a crypto or an asset may fall.
Strategies Used In Bear Cryptocurrency Markets
A blend of technical and fundamental analysis is utilized for the crypto bear market prediction of upcoming trends in the digital currency space. Technical pointers like the Parabolic SAR and Moving Averages (MA) aid in identifying market trends.
Traders use positions to ‘go short’ during bear market crypto 2021 as the values are shifting downwards. Many strategists facilitate traders with techniques to earn profit even in bearish or downtrends in crypto trading. Moreover, it is possible to robotize strategies. These strategies involve selling a digital currency asset before the trader actually owns it, and purchasing it later on at a lower value (as the market decreases). The next bear market cannot be predicted soon.
The Bottom Line
In this article, we have widely covered the conditions of crypto bull and bear markets in digital currency trading. We have also discussed strategies and tools that can be enacted to optimize the crypto trading experience.
Both the markets offer chances for profits that are dependent upon the strategies that require to be enacted. At the same time, it is important to increase risk elements regardless of the market trends. The crypto space is highly fluctuating and it is important to conduct thorough due perseverance before investing.