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Bybit Learn
Bybit Learn
Aug 5, 2022

Bull Market

The term “bull market” describes an extended period of rising crypto prices and optimistic investors. During a bull market, prices are high and the public isn't concerned about potential downturns.

If you're interested in investing in crypto, bull and bear markets are two of the most important concepts to know. These descriptions provide a lot of insight into how crypto trading works. To make the most of your investments, you need to understand how bull markets work and how to identify them.

What Is a Bull Market?

A bull market, or a bull run, occurs when all the various crypto prices increase. Though an individual crypto might have a slight dip, the overall market trends upward. Multiple coins need to be increasing in price for a crypto bull run to occur, and this price increase has to be sustained for at least a day or so.

Keep in mind that there's no set level of price increase when a bull market occurs. In stock investments, a bull market is often defined as beginning when the S&P index is 20 percent higher than its last bottom. However, crypto markets are smaller and tend to fluctuate a little more frequently, so bull markets aren't as rigidly defined. In crypto, bull runs can last as little as two days, or they can continue for months on end.

Applied to crypto, this definition is often expanded to refer to trading strategies themselves. A bull trader buys crypto expecting prices to increase. You might also hear people describe a trader as having a "bull attitude," which means the individual believes the market will keep rising.

What Causes a Bull Market?

The rising prices of a bull market usually aren't caused by random coincidences. Instead, they occur when a series of events combine to make crypto investors feel more positive. When crypto traders are feeling optimistic about the economy, they’re far more likely to trade crypto enthusiastically. This causes prices to gradually increase over time, and the increasing prices cause a positive feedback loop in which investor confidence continues to rise. There are a variety of factors that go into this increased investor optimism, including:

  • Relaxed regulations that allow more crypto trading

  • Increased levels of employment that leave people with more money to invest

  • Government policies that lead to companies growing financially

  • Strong GDP that boosts overall confidence

  • Increased wages and decreased inflation that allow more crypto investment

  • High amounts of spending that strengthen the economy

Characteristics of a Bull Market

How can you identify a bull market? A crypto bull market is defined by a few specific traits.

  • Increased demand: There’ll be more people looking to buy crypto than people looking to sell.

  • Higher volume of trades: When you look at trading metrics, you'll notice there are more buys and sells happening.

  • Unexplained growth: The increased confidence can spill over into markets that wouldn't otherwise be rising. Crypto may experience a significant price increase, even if there hasn't been any noticeable reason for one.

  • Bookended by downturns: Right before and after the bull market, there will be a sharp downturn in crypto assets.

  • Unrealistic valuations: Not all characteristics of a bull market are positive. Unfortunately, they can lead to bubbles, in which crypto values inexplicably elevate.

  • Impressive returns: On average, investor returns during a bull market are around 112 percent. These high returns make it easy for people to profit from crypto.

Bull vs. Bear

Any time you're considering a bull market, it's important to think about its counterpart. The opposite of a bull market is a bear market, which occurs when the public is pessimistic, investors are concerned and prices fall drastically. The crypto market typically cycles between bull and bear. If it’s not in one, it will often be in the other. Bear markets usually don't last as long as bull markets, but they can have very low prices.

Should you buy crypto in a bull market — or a bear market? Of course, the ideal option is to buy a lot of crypto during a bear period and sell it at the end of a bull run. However, timing the market can be tricky. Not only is it hard to predict when prices will change, but prices tend to increase overall. Therefore, a crypto's highest price during a bull market might still be lower than its lowest price during a later bear market.

Consequently, most investors don't recommend trying to buy only during a bear market. Instead, it’s better to identify the type of market you’re in and shift your buying strategy accordingly. Strategies like buying and holding crypto can work well during a bull run, and techniques like call options can also provide big returns in a bull market when utilized correctly. During a bear market, it’s best to focus on diversifying your portfolio and looking for high-value crypto selling at a very low price.