The terms Bull / Bear are used to describe the overall sentiment or trend in a market. A bull market is one in which prices are rising, while a bear market is one in which prices are falling.

The Origin of the Terms

The terms are thought to originate from the way each animal attacks its opponents. A bull thrusts its horns upward, symbolizing rising prices. A bear swipes its paws downward, symbolizing falling prices. This simple imagery has become a universal way to describe market sentiment across all financial markets, including cryptocurrency.

Market Characteristics

In a bull market, optimism and investor confidence are high. People are willing to invest because they believe prices will continue to rise. This increased demand drives prices even higher, creating a positive feedback loop. Bull markets can last for months or even years.

In a bear market, pessimism and fear dominate. Investors are reluctant to participate because they believe prices will continue to fall. As a result, they sell their assets, which further drives down prices. Bear markets can be difficult for investors, as losses can accumulate quickly. A common rule of thumb for a bear market is a sustained drop of 20% or more from recent highs.

How It Impacts Trading

Understanding the difference between these two market cycles is crucial for a trading-pair strategy. During a bull market, many investors adopt a long-term HODL strategy, holding onto their assets in anticipation of further gains. During a bear market, traders may look for opportunities to buy-the-dip or seek out strategies that allow them to profit from falling prices. Identifying the market trend is the first step in making informed investment decisions.