What is a Bull Market
A Bull Market, also known as a Bull Run, is defined as a prolonged period of time characterized by demand outweighing supply, high investor confidence, and optimistic market sentiment resulting in rising prices. In cryptocurrency, a bull market is also associated with decreased Bitcoin dominance, a rising interest in the altcoin market and Initial Coin Offerings, and an influx of new investors.
The term is widely used not only in cryptocurrency trading, but in traditional financial markets. Although often used loosely, it traditionally applies to a state of the market where asset prices rise by 20% from their previous low for a prolonged period of time. In crypto, of course, it is not uncommon to see a 40% price increase in just a few days due to market volatility.
As a bull market marks its end, it may be followed by a sideways price movement, commonly referred to as a crab market in crypto, or it may give way to the feared bear market.
Why is it called a “Bull Market”?
The reference becomes obvious when one considers the animal’s behavior. A bull charging forward with energy and thrusting its horns in an upward motion represents a surge that can be observed in the market during a bull run.
How do I know the bull market is coming?
Forecasting a bull run is challenging, and there is no foolproof method to predict with certainty when a bull market will occur. However, analysts and investors use various indicators and metrics to gauge the likelihood of a bull run. Common methods include technical analysis, evaluating market sentiment, analyzing on-chain metrics and historical patterns.
What’s the best strategy in a bull market?
In a bull market, the best possible strategy for an investor is to buy assets early in the uptrend, allowing them to ride the wave of rising prices, and then sell them at the peak, maximizing their gains before the market eventually reverses.
Although the bull market is an overall upward trend, it consists of smaller fluctuations, both up and down. Experienced traders know the importance of following market momentum, which manifests in making a move on an asset that’s already showing strong price appreciation, and managing risks by taking profits and diversifying their portfolio.
Investors often fall prey to emotional biases during market extremes, and the bull market is no exception. In bull markets, recency bias can lead to overconfidence and excessive risk-taking. For this reason, proper risk management is essential to avoid losses in a volatile market.
