After all, it is impossible to perfectly time the market
Much like the stock market, the cryptocurrency market has its share of highs and lows. But cryptocurrencies are highly volatile and can change in value of 100s or 1000s in a day. These fluctuating periods are called ‘Bull and Bear’. The highs or peaks are referred to as the bull market and the lows and dips are termed as bear market.
While timing the market and investing can be difficult at any time, it can be particularly difficult during the bull or bear runs.
Let’s dig further to understand how cryptocurrencies and investors react to these market moves.
What Is a Bull Market?
A bull market refers to a strong market uptrend characterized with more buying by investors, high market confidence, positive prices, etc.
Basically, it is a sign that investors and the market is ‘bullish’ about the increasing prices and the believers are called ‘bulls’.
Generally, a 20% sustained increase in market prices is often considered as the start of the bull market. This is usually preceded by a previous 20% or more decline. Sometimes, investors wrongly interpret short-term downward movements as the end of the bull market but it is important to consider the price fluctuations over longer time frames.
Investor sentiment during a bull run:
a. Buy rising cryptocurrency early during the climb and sell when they reach their peak
What Is a Bear Market?
The market is considered Bearish when the supply is greater than the demand, prices are falling, market is down 50% or more and the general sentiment in the market is pessimistic.
It is difficult to predict when the market has reached a bottom price as many external factors like FUD, world news, economic crisis, investor sentiments can influence it.
Investor sentiment during a bear market:
a. Sell their holding to avoid losing money
b. Short sell by selling shares and buying them back at a lower price, thereby booking profits.