What Is Bullish vs Bearish?

Financial markets have their own vocabulary and if you’re new to trading, you must’ve heard many unfamiliar expressions being thrown around, such as bullish and bearish.

These terms are most commonly used in the stock market and real estate, and now in cryptocurrency, too. Simply put, the terms refer to sustained falling and rising trends on the market, wherein a bull market is a rising market and a bear market is a declining one.

The names come from the way each animal attacks – bulls attack by pushing their orns upwards, whereas bears strike their claws downwards.

But what exactly do these trends mean and how do they come about? In this article, we’ll talk about everything – from the basics of bullish and bearish to how it translates into the cryptocurrency market.

Bullish and the Bull Market

A bull market refers to a period of time when a certain market is on the rise due to a favourable economic climate. During this time, the market sentiment of investors is positive, meaning that they’re optimistic about the market and the future results, which propels the bull market forward and contributes to its upward trend. 

Side profile of brown bull figure on black background

By extension, to have a bullish attitude or to be bullish means that an investor believes that the stock prices will only continue to rise from where they currently are. Bullish traders are interested in going long on equities whose prices will retain an uptrend for long enough to make a lucrative profit. 

Essentially, bull markets are driven by the public confidence in that equity. Bullish investors start buying assets when the price of stocks is still low, but they feel optimistic about the prices increasing in the foreseeable future. So as investor confidence goes up, so does the demand, and so do the prices, creating a positive feedback loop until the loop is interrupted from within and the market changes course towards bearish.

The cryptocurrency market is quite volatile, so the change from bullish to bearish and vice versa happens much faster than in other markets because, in comparison, the crypto market is much smaller and more susceptible to changes. 

For example, Bitcoin and Ethereum are the most volatile cryptocurrencies on the market. This volatility is a result not only of the changing attitudes of investors but also factors that are unique to crypto, like mainstream media hype, investor and user sentiments, and government regulations.

Main Attributes of a Crypto Bull Market

You’ll recognise a bull market in the crypto world when there is a strong demand for a cryptocurrency despite the weak supply, which results in the prices skyrocketing and maintaining an uptrend for a prolonged period of time. As the crypto market is incredibly volatile, even a relatively short uptrend could be lucrative. This domino effect is a result of the increased investor confidence in the overall market, which can also lead to overpricing, in certain scenarios.

Moving on from behind the scenes to the mainstream – you’ll notice increased mentions of crypto in the media, especially on social media, sometimes propelled by celebrities and influencers who might have become interested in crypto during this booming period of time. There is also a higher number of international investments.

Finally, there will be fluctuations in the prices of cryptocurrencies based on the overall market conditions – a good climate will lead to a sharp increase in prices, while a bad climate will result in only a slight drop. The important thing is that the baseline of the uptrend will still remain high despite the fluctuations.

Bearish and the Bear Market

In contrast to the bull market, the bear market is characterized by an unfavourable economic climate and a sustained decline of prices. Whereas a market correction is defined as a downtrend of over 10% from recent highs, but no more than 20%, bear markets tend to decline continuously by at least 20%. 

Gray downward arrow on white background

According to Investopedia, one of the most notable bear markets was brought on by the 1929 U.S. stock market crash which led to the Great Depression and lasted for nearly three years. Even now, it’s still considered the worst economic downturn in history.

During a bear market, the supply is bigger than the demand as investors turn more pessimistic and their interest in the equity is fading. Typically, the prices start dipping as soon as unfavourable news about a certain asset spread around. Then, one by one, investors hold off for fear of uncertainty and major losses, propelling the start of the bear market.

Thus, to have a bearish attitude or to be bearish means that investors believe that the prices of that asset will fall, and may opt to sell them or choose short selling and buy them later at much lower prices. 

In the crypto world, you can’t predict when a certain cryptocurrency market will turn bearish just based on previous trends because crypto is a rather young market still in development. For this reason, past performances of the crypto market can’t really predict future results, as even professional analysts don’t have enough data to refer to.

Main Attributes of a Crypto Bear Market

When the investors’ confidence starts diminishing and they become pessimistic about their return on investment, the first thing you’ll notice is that the overall market climate is facing a sustained downward trend. 

As we said, the bear market is the complete opposite of the bull market, so the first thing you’ll notice when the trends switch is that the prices are falling with no sign of stopping. At this point, the supply is far greater than the demand and people are not only losing assets but also trust in the crypto market. The market is either scarcely mentioned in the media or it’s presented with a negative image and there are fewer international investments.

And finally, like the bull market, the bear market also features fluctuations or market corrections, but not significant enough to change the course to bullish. When the market climate is good, there is only a slight increase in the prices, whereas, in a bad climate, the declines are sharper.

When Does a Bullish Market Switch to a Bearish Market and Vice Versa?

There isn’t exactly a time frame for how long bullish or bearish markets will last before they change courses. Similarly, short-term trends or market corrections can’t be used to make predictions as there are many external factors involved, especially concerning the crypto market. 

Bull and bear figures with bitcoin in between on white background

Typically, the start of bear markets is triggered by bad news, like unfavourable changes in legislation, political crises, wars, and unforeseen circumstances. This causes a commotion among investors and a ripple effect where they start selling off their assets one by one, further propelling the downward trend.

The trend changes when speculators, who are willing to take risks, are willing to make purchases, which slowly starts to change the course. Speculators are vital for the economic climate because they bring liquidity and help things move. Bull trends are also supported by economic growth and low unemployment rates, as well as strong gross domestic product rates.

How to Trade Crypto on Bullish and Bearish Markets

Trading crypto can be risky due to the volatile nature of the market, so keep in mind that you should think twice before making changes to any of your assets. Trading crypto involves making smart investment decisions and employing trading strategies that work. But, you always have to leave some room for a turn of events and things not going the way you expected.

If you’re a beginner, the simplest strategy that you can employ during a bull market is to buy the currency as early as possible then sell your shares when the probability of your return on investment is at its highest.

Bull markets are unpredictable, but if you’re willing to wait until the cycle changes again, you can reap the rewards. However, when this shift will happen can’t be predicted, so keep in mind that the risk is double.

Is It Better to Be Bullish or Bearish?

Bullish and bearish markets can’t exist without one another, so having them on two opposite sides is what keeps the economy going.

Bullish investors like buying equities that they believe will increase in value, while bearish investors are looking for more valuable assets than the ones they own so they sell them. In a way, it’s a cyclical “microclimate” where everyone is after the same thing, but at a different time.

Woman with confused expression holding bitcoin and piggy bank on pink background

You can be bullish one day and bearish another, but what you should care about more is how accurate your assessments are in the stance you’re taking, and make the best of it.

Closing Thoughts

You can’t trade crypto without learning a little about the most commonly used terms in trading. Bullish and bearish represent two sides of the same coin where investors and traders look to make a profit in one way or the other. 

Unlike other markets, the cryptocurrency market is still developing, making it volatile and unpredictable, and easily influenced by external factors. Bottom line is, you can’t predict how long a bullish or bearish trend will last, but you can try your best to make smart investment decisions whichever position you find yourself in.