You may have heard of Bull market and Bear market, but do you know what they mean? Understand the concepts and impacts for those who make investments.
Those who work in the financial market or follow different stocks have certainly come across the terms Bull Market and Bear Market, now called Bull Market and Bear Market. Quite simply, these terminologies indicate consolidated falling moments (Bear market) or consolidated rising moments (Bull market). Each has its particularities and both have profit opportunities.
It is not known for sure where the term “Bull” and “Bear” to describe stocks in the market comes from. Some make an analogy to how Bears attack (always with blows downwards) and how Bulls attack (with gores upwards), but there are other historical contexts for these origins.
A curiosity: Terms have evolved over time to also describe people who believe or not in a specific asset, for example: Peter Schiff is a big Bitcoin Bear, but one of the main Gold Bulls.
But beyond the historical context, how can these moments be identified and how do they affect the crypto market?
Bull market
The term Bull has an origin that is difficult to trace. What is known is that the image of the bull as someone who is positive in relation to the market has existed since the 18th century and has always been seen as a counterpoint to the Bear. Some believe that the bull is linked to the opposite of the bear because of the fighting between animals that took place in the USA between the 18th and 19th century.
It’s no wonder that one of the most famous financial symbols in the world is the Bronze Bull of the Financial District, near Wall Street.
The term Bullish is also common to describe positive moments or investor sentiment towards a particular asset.
What it means?
The Bull Market is when we have a very positive moment, with the general appreciation through the market or a single asset. At these times we have low selling pressure and an asset far from overbought indicators.
Therefore, the Bull Market indicates that asset prices will maintain an upward trend because of demand and positivist sentiment. This is a cycle of appreciation, where many make profits and have a return on their investment.
How does it happen?
The bull market is just a market cycle and it can happen in shorter or longer periods, depending on the type of asset this period can only last for a few days. What starts a bullish period is directly linked to investor sentiment and the demand for a certain asset.
These cycles can be started by news that affects the asset itself, uncertainties about certain sectors or any other trigger. Often the cycle just follows the natural path of the market after a long period of buying pressure.
More important than knowing how it happens is being able to predict when this cycle is starting. This is exactly why we have graphical analysis as an important tool for investors, with features such as Moving Average , Bollinger Bands and many others to determine when the market trend is about to change.
How to profit from the bull market
This market cycle is also a cycle where there is an opportunity to profit. Since the Bull Market represents an increase in price, those who can see the beginning of this cycle can buy the asset and sell higher shortly afterwards.
For this, a strategy is needed so as not to buy the wrong one. But it is through these cycles that traders are able to secure their profits and increase in equity. To profit in the bullish market, it is essential to know where the trend can start and end so as not to lose money.
Bear market
The term Bear came first and some say that the origin is in the 18th century bearskin selling speculators and the saying “Don’t sell the skin until someone has caught the bear”.
With that, the bear is the one who bets on the fall, on the lowest price at which he sold. Just like the Bull term, there is also the bearish variation to determine the sentiment about a particular stock or asset.
What it means?
As you can imagine, the Bear market is the opposite of the Bull Market and is characterized by general pessimism, which consequently increases buying pressure and decreases demand. This is a tricky period for different assets, also known as “bleeding”, referring to red prices.
But, as is normal for any market, this cycle also brings several profit opportunities for different investors.
How does it happen?
The main force behind the Bear Market is massive selling of the stock or asset in question. This selling can be triggered by different types of factors, from global crises (as happened with the coronavirus) to harmful news for a particular market.
Technically, it’s easy to understand how the Bear Market works: when investors believe they are going to start losing the asset’s value, they try to sell at the current value to have less loss. Other investors follow this trend and pressure to sell sets in.
As you can see, this is a common market movement, as the bearish moment can be triggered by the simple fact that investors realize the profits of a bullish cycle.
Identifying this type of moment is similar to how to identify the bear market, it is necessary to study and analyze graphically and fundamentally about a certain asset.