Crypto Market Stages: Recognizing Bull and Bear Markets

The cryptocurrency market is constantly changing, bringing many opportunities and risks, from the birth of Bitcoin to the development of thousands of new cryptocurrencies. The ability to distinguish between market stages - often called "bull markets" and "bear markets" - is a key factor in investors' success. This article provides the most general overview of these two prominent stages to help you better understand how the crypto market works and make smarter investment decisions.

Bull Market Stage

A Bull Market, also known as a bull market, is a period in which the value of financial assets, such as cryptocurrencies, increases sharply and maintains an upward momentum for a long period of time. This stage is likened to the charge of a bull with sharp horns rushing high, symbolizing a continuous and sustainable increase in price. Bull markets typically occur when the economy is strong, as investor confidence in continued growth in asset values ​​leads to larger purchases.

Key Characteristics of Bull Markets 

Strong and continuous growth in asset values, sometimes over short stages of time, is a characteristic of bull markets. The optimism and confidence of investors cause prices to increase. Due to the entry of many new investors eager to make a profit, trading often increases. 

Economic growth, new technological developments or widespread acceptance of crypto assets could be the cause.

Real-life Examples of Bull Markets

The 2017 bull market is the most prominent example in cryptocurrency history, as Bitcoin's price rose rapidly within a year from around $1,000 to nearly $20,000. The explosion of ICOs and public interest in cryptocurrencies has led to a significant increase. 2020–2021 saw a turning point in the bull market as major financial institutions adopted Bitcoin and DeFi and NFT applications grew, raising its price from under $10,000 to over $60,000.

Bear Market Stage

A bear market stage, also known as a bear market, occurs when the value of financial assets falls sharply and lasts for a certain stage of time. This is different from the bull market. During this stage, the term "bear" was used to describe the attacking action of a bear swinging its claws downward, similar to how prices plummet. When the economy struggles, a bear market appears, causing investors to lose confidence and begin selling off their assets to avoid losses.

Key Characteristics of Bear Markets 

Asset values decline sharply and persistently during a bear market. Fear is prevailing, causing many investors to worry that asset prices will continue to fall, so they try to sell assets immediately. Many investors withdrew to preserve capital, causing transactions to decrease. 

Economic downturns, the failure of technology projects or adverse events such as strict government regulations are causes.

Real-life Examples of Bear Markets

In 2018, the bear market experienced a memorable moment when the price of Bitcoin fell from nearly 20,000 USD to less than 4,000 USD following the boom of ICO projects and the failure of many projects that had no real value. For a more recent example, in May 2024, Bitcoin lost 12.8% of its value in just 12 hours. It fell from $61,000 to $52,300 and at one point fell below $50,000, its lowest level since February 2024.

Bull vs Bear Markets: Signs to Recognize

Understanding and distinguishing between bull markets and bear markets is an important factor in making accurate investment decisions. Below are some ways to identify each type of market that can help investors determine the appropriate time to buy or sell.

Technical Analysis

Technical analysis is an important tool for identifying trends in the market. Entry and exit points can be determined using moving averages, MACD (Moving Average Convergence Divergence) and RSI (Relative Strength Index). RSI indicates whether the asset has been overbought or oversold, while MACD shows a change in price dynamics. Moving averages help identify long-term trends.

Psychological Factors 

The stages of bull and bear markets are significantly influenced by investor sentiment, which can be tracked with the Fear and Greed Index. Optimism during the bull stage drives buying and price increases. However, fear during the bear stage leads to panic selling and a decline in asset values. To avoid emotional investment decisions, you must understand and manage your own psychology.

Events and News 

Events and news can affect the cryptocurrency market. New regulations could reduce its value, while the introduction of Bitcoin payments or new technology could generate growth. Bitcoin's so-called "halving" event is when Bitcoin mining rewards are halved, often leading to an increase in Bitcoin's price.

Related content: What is the Bitcoin Halving and Why Should You Care?

Investment Strategies in Bull and Bear Markets

Based on the concepts and characteristics of the two market types mentioned, here are the optimal investment strategies to capitalize on opportunities in a bull market and effectively protect assets in a bear market:

In a Bull Market 

Investors in bull markets often focus on growth assets and strategies to maximize returns. To take advantage of the market opportunities, HODLing is a popular strategy for holding assets for the long term. At the same time, the bullish averaging (DCA) strategy, in which investors buy additional assets at different prices to reduce risk and increase profits, is also commonly used.

Additionally, when asset prices fall during a short-term correction, investors take advantage of this opportunity to buy assets in the hope that the overall market trend will recover. Technical analysis is also used to determine optimal entry and exit points, based on historical price trends and patterns.

In a Bear Market 

During a bear market, investors' top priority is to protect capital and assets from major losses. Investors often exchange assets for stablecoins or safer assets such as bonds or gold. Additionally, hedging strategies are used, where financial instruments such as inverse options or ETFs are used to offset potential losses.

You might also be interested to learn more about the Bitcoin Spot ETF.

In addition, the price-averaging strategy is also used. In it, investors average investment costs by buying assets when their prices decrease. To avoid "catching the bottom" at the wrong time, this requires careful analysis.

During this stage, fundamental analysis is an important tool; it evaluates the financial situation of businesses and considers their growth potential. Short selling may be an option for experienced investors, allowing them to profit from predicting when asset prices will fall.

Optimize Your Investment in the Crypto Market

To be successful in the volatile cryptocurrency market, you must understand and differentiate the market stages. Understanding the stages, causes and signs of each stage helps investors build reasonable strategies and minimize risks. What is needed to achieve long-term success is to stay mentally stable, update information regularly and avoid emotional investment.

Finally, choosing a reputable and safe wallet platform is very important to support the investment process in all market stages. As a pioneering platform, Bitget Wallet not only protects your assets but also provides you with smart investment support tools and features that will help you make the most of opportunities in both market stages.

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