When you follow the price of crypto, you will see that the price goes in a kind of wave movement. The price is low, goes up, reaches a high and then falls again. This is called a market cycle. A cycle mostly takes several years. For bitcoin, and in principle crypto in general, we speak of a bull or bear market. But what do these terms mean, and why is it called a bull or bear?
The terms bull market and bear market are used in all financial markets, including cryptocurrency. These words are actually mainly used in the stock world, and refer to a trend of the price:
• A bull market is characterized by optimism, prices are rising.
• A bear market is characterized by pessimism, prices fall.
Since bitcoin and cryptocurrency is used as an investment, these words also appear in cryptocurrency. A bull market or bear market can arise in different ways. Consider, for example, a change in supply and demand, or a change in the economy. But don’t forget the psychology in the market. Is the price rising very fast and is there a bull market? Then this can have a reinforcing effect. More and more investors are joining and also want to buy bitcoin.
But what does a bull market mean? #
A bull market means that the price of a financial product rises for a longer period of time. But why is a bull used as an example? This has to do with the way a bull attacks its prey. A bull drags its prey up with its horns, a nice comparison with the rising prices. During such a bull market, investors are very optimistic. This form of optimism is also known as bullish. When someone says he is bullish, he is actually saying that he is confident that prices will rise in the long term. An extended period of time in which prices rise is called a bull run.
On Wall Street you will find a statue of a bull. This bull symbolizes confidence in the (stock) market, and the hope that the prices will rise.
Bear Market #
A bear market means that the prices of a financial product fall sharply. Many websites describe a drop of twenty percent. It is no coincidence that the bear is used as an example. When a bear attacks its opponent, it knocks down with its claws. You can also compare this nicely with the falling prices. During a bear market, investors are generally pessimistic about the future. When someone says they are bearish, they are actually indicating that they are confident that prices will fall in the long run.
In Frankfurt, near the stock exchange building, you will see a statue of a bull and a bear. This symbolizes the proverbial “fight” between bullish investors and bearish investors.
Pump & dump #
When the value of a coin suddenly rises very fast for no apparent reason, there is a good chance that this is due to so-called ‘pump and dump’ groups. These are wealthy and influential groups that buy large amounts of a coin and also promote it. This will cause the price of this coin to rise sharply. When the increase is sufficient, they massively dump their previously purchased coins and reap the profit. This will cause the price to fall again very quickly.
Pump and dump groups capitalize on the feeling of novice investors who see a coin soar. Because they don’t want to miss the boat, they also get in, but the rise is already such that the late starters will eventually be left behind with a loss after the dump.