“Bull” and “Bear” are terms used to illustrate the condition of stock markets, and an investor needs to have all the information to understand how his assets are going to be affected.
What is the bull market?
A bull market (also known as a bull run) describes a division of time where investors are buying, and the conditions of the economy are usually auspicious. Usually, a bull market exists in a retreating economy, and assets are decreasing in value. This is the moment where investors become optimistic (or bullish) and start buying.
During this period, the demand exceeds the supply, generating the increase of the price, giving hope to confident investors (usually called bulls) that this uptrend will be durable. If this happens, the economy will commonly be strong, with higher levels of employment.
When it comes to cryptocurrency, its price is mostly affected by the trust people have in that asset. Some investors attempt to discover investors’ optimism in a given market. This is called “market sentiment”.
During bull markets, there can be fluctuations or corrections of the price. This is a normal thing, but if investors believe prices will continue to fall, this can bring the end of a bull market and the beginning of a bear one.
What is the bear market?
The term “bear market” is used to describe a length of time where the market is in decline. During this period the confidence level is low, supply is bigger than the demand, and prices are continuously dropping.
A market is not referred to as a bear market unless the price has fallen by 20% or more from the most recent high. The investors who believe prices will continue to drop are named “bears”.
During a bear market the economy usually slows down and unemployment increases. Even though it is very difficult for new traders to trade, if you have a long-term investment plan, this may be a good time to act. When this cycle changes, profits may be considerable.
There are some reasons why a bull or bear market can start:
- The changes between demand and supply.
- Investors’ psychology.
- Changes in the economic conditions.
Both of these markets will affect your investments, so it is important for you to do your research, and be updated on everyday fluctuations.
(Read more about bitcoin bearish alerts in our other article!)
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