Bull markets and bear markets represent the ebb and flow of the crypto industry. This guide will explain what bull and bear markets are and what strategies traders use during each.
Bull Market & Bear Market Defined
- The terms bull market and bear market can be used for any type of investment
- A bull market describes a market that is rising in value
- A bear market decribes a market that is declining in value
- There are specific strategies that traders use during both
How to Spot Bear and Bull Markets
For all types of markets, a substantial price swing in one direction or the other of at least 20% within 6 months or longer generally signals a bear or bull market. Indicators of bull markets are often a set of higher highs and higher lows. With bear markets, an indicator would be a series of lower highs and lower lows.
The general characteristics of bull and bear markets are as follows:
- Strong market downtrend; prices are going down
- Pessimistic market sentiment
- Crypto is more volatile and drops can happen faster
- Market is in a Markdown Phase (precedes Accumulation Phase)
- Demand is lower than supply
- There’s less trading happening
- Strong market uptrend, prices are going up
- Optimistic market sentiment
- Prices may still experience drops/volatility
- Zoom out to see overall bull market
- Market is in a Markup Phase (precedes Distribution Phase)
- Strong demand and weak supply
- There’s more trading happening
You may see a bear market during one year but if you zoom out to 5 or 10 years, it may be a bull market overall. One example would be the NASDAQ stock exchange, which crashed with most global markets at the height of Covid-19. But if you zoom out, you can see that despite the 2020 bear market, the NASDAQ has actually been uptrending since 2009.
How to Trade in Bull & Bear Markets
No matter whether it’s a bear or bull market, there are strategies available to investors, including:
- Getting ahead of market psychology
- Buying the dip
- Using automations to take emotions out
Crypto markets & investor psychology
Markets tend to be impacted by how investors perceive or react to current market behavior, so investor psychology and sentiment can also affect future market prices and price swings.
- In a bull market, investors are happy to invest in hopes of profiting.
- During a bear market, investors feed off the negative sentiment and are reluctant to buy.
This type of market psychology can sometimes cause people to act against their own interests. For instance, during a bear market prices are low and it can be a good time to accumulate, even though the market sentiment is low. Conversely, during the height of a bull market prices are high, making it potentially more difficult to make a profit if you buy.
Learn more about the 4 main Market Cycles that repeat in crypto markets.
How to trade bear markets
During bear markets, traders have multiple ways to ride out the downtrend:
- Traders can take advantage of dips to accumulate and potentially get favorable prices during a reversal.
- Technical indicators such as Quadency’s Multi-Level RSI Bot can help identify potentially profitable entry and exit points by tracking momentum.
- Diversifying during a crypto bear market is part of risk management and can involve staking platform tokens, holding stablecoins, and looking for long-term performers.
- Fundamental Analysis enables investors to dig in with their DYOR to identify low price coins for projects they can get behind.
- A scalping strategy enables traders to buy coins at a low price and try to make a fast profit by reselling in a short timeframe, such as 1 day or 1 hour. Quadency's smart terminal enables investors to view and act on prices across multiple exchanges.
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How to trade bull markets
Traders in a bull market generally look for ways to track momentum, find early entry points, and automate profit taking.
- Buy early by using momentum indicators like MACD to spot early bull markets and place long positions.
- Set up take profits so that all is not lost when the bear market comes. It's easy to do with a bot like Quadency’s Smart Order.
- Avoid FOMO by using trading automation and sticking to your trading strategy.
- Buy the dips which also occur during bull markets and stay on the right side of momentum. Quadency’s Accumulator Bot lets you configure a Dollar Cost Averaging (DCA) strategy with limits.
In the world of crypto, bear markets signify low market sentiment but may offer a good chance for coin accumulation. Bull markets are often riddled with FUD and FOMO and may offer a good time to sell or buy the dips if the timing is right.
- Manage your automation strategies with ease at Quadency
- Guide to Impermanent Loss
- Discover QUAD tokens and start staking!
Quadency is a cryptocurrency portfolio management platform that aggregates digital asset exchanges into one easy-to-use interface for traders and investors of all skill levels. Users access simplified automated bot strategies and a 360 portfolio view with a free account.
Disclaimer: The content of this article is for general market education and commentary and is not intended to serve as financial, investment, or any other type of advice.