Crypto Bull Market vs Bear Market: A Beginner’s Guide
Understand the dynamics of crypto bull and bear markets, their impact on prices, and investment strategies for each cycle with Trust Wallet.
While the terms bull market and bear market come from the traditional financial (TradFi) markets, they have also been adopted by cryptocurrency traders and investors to refer to the ups and downs of crypto market cycles. Before we dive into this guide covering crypto bull and bear markets, remember that you can securely buy, sell, swap, store, and manage 10+ million crypto assets using Trust Wallet.
Now, let’s look at what bull and bear markets are and when they occurred in the crypto asset market in the past decade.
Defining a Bull Market
A bull market refers to a market in which asset prices are increasing and are expected to continue to increase.
The term “bull market” originates from the two statues on Wall Street, a bull and a bear, where the bull has its head up, indicating rising markets, while the bear has its head down, indicating falling markets.
In the stock market, a bull market traditionally refers to when there’s an upswing of 20% or more in a broad market index over a minimum of two months.
In a bull market, economic conditions are usually on an upward trajectory, accompanied by positive investor sentiments. In addition, the prolonged increase in asset prices typically goes in tandem with high employment levels and a strong economy.
In the crypto asset market, bull runs have historically been much stronger than in the equity markets, with top-performing assets rallying by several hundred or even thousand percent.
Fueled by growing interest from an increasing range of different types of investors, ranging from high-net-worth individuals to institutions, crypto bull markets have always resulted in an optimistic atmosphere among traders and investors.
Crypto bull markets are characterized by steady price increases, high market confidence, growing crypto coverage in mainstream media, increased social media activity, and burgeoning interest from celebrities, influencers, and newcomers entering the market.
Knowing whether crypto is in a bull market is critical for investors as it can help them know when to buy, sell, or HODL their digital assets. For instance, in 2017, the crypto market experienced a bull market that pushed the price of Bitcoin (BTC) to $20,000. In the next market cycle, the bull run pushed the price of the leading cryptocurrency to a high of almost $69,000 in 2021.
Bitcoin halving events have been a notable driver of the crypto markets, resulting in bull markets around 12 to 18 months after each halving. During each Bitcoin halving event, the amount of newly mined BTC is reduced, resulting in new BTC being released into circulation at a slower rate. Combined with increasing demand for the digital currency, this has historically pushed up the price of Bitcoin.
And when Bitcoin rallies, the rest of the market typically follows suit, with leading cryptocurrencies like ether (ETH) often rallying more than BTC.
Defining a Bear Market
A bear market is the opposite of a bull market. In the bear market, asset prices are declining, and investor sentiment is negative, with the expectation of further price declines.
In the stock market, a bear market generally refers to when there’s a drop of 20% or more in a broad market index over a minimum of two months.
In a bear market, economic conditions are typically on a downward trajectory accompanied by negative investor sentiment. Economic growth in a bear market is usually slowing down, or a recession is taking place, leading to reduced optimism and confidence among investors.
Like in the stock market, bear markets also occur as part of the crypto market cycles we have been able to witness in the past decade.
Crypto bear markets are characterized by a dip in prices over a sustained period, a lack of investor confidence in the crypto market, reduced cryptocurrency coverage in the mainstream, less crypto chatter on social media, and a general pessimism among investors towards digital assets.
In a crypto bear market, crypto asset values have dropped significantly more than 20%, with some digital currencies and tokens dropping as much as 99% in value or becoming entirely worthless.
For example, after the Bitcoin high of $20,000 in December 2017, the price of the leading digital currency continued to drop to hit $6,000 only six months later, bottoming out at around $3,000 in December 2019.
Crypto investors typically try to sell their crypto assets during a bear market to avoid booking steep losses. Conversely, it’s also common for some investors to buy crypto assets during a bear market and hold on to them until the market becomes bullish again. However, investors are usually wary of buying assets during a bear market as it’s hard to tell when it will end.
Historical Overview of Bull and Bear Markets in Crypto
There have been notable bull and bear markets in crypto over the last decade. Below is the timeline of previous crypto bull and bear markets.
2011 Bull Market
The beginning of 2011 was good for Bitcoin as the digital currency enjoyed an excellent start to the year, with its price soaring to a high of $42.67.
2011 - 2012 Bear Market
Between 2011 and 2012, the price of BTC plummeted to less than $2 due to security issues faced by the prominent crypto exchange, where the majority of Bitcoin was traded at the time.
2013 Bull Market
2013 was the year BTC and other altcoins began to gain more traction among speculators. This resulted in the price of Bitcoin surging to $100 by mid-April before continuing an upward trend to briefly reach $1,000 by November of the same year.
2014 - 2015 Bear Market
In late 2013, the Chinese government began cracking down on Bitcoin, which had a ripple effect on other cryptocurrencies. During this period, the price of BTC dipped to nearly $200. This was also linked to the collapse of the Mt. Gox Bitcoin exchange, which filed for bankruptcy.
2016 - 2017 Bull Market
After a bearish market, the boom of initial coin offerings (ICOs) led to substantial price increases in the values of BTC and ETH. The price of BTC surged to $20,000 by the end of 2017, only to start dipping in early 2018, leading to yet another bear market.
2018 Bear Market
2018 was the start of the so-called “crypto winter,” where digital asset prices dropped significantly following the 2017 bull market. The ICO bubble had burst, with many recently issued tokens losing over 90% of their values. The price of BTC dropped from its most recent high to hit a 2018-low of under $6,000. The price of ETH dropped from $755 to $140.
2019 - 2020
In 2019, crypto prices had hit a multi-year low, with BTC trading just above $3,000 before the market began to stabilize and recover from what had been a lengthy crypto winter lasting nearly two years.
2020 - 2021 Bull Market
After a long crypto bear market that began recovering in 2020, 2021 saw the price of BTC and ETH surge to almost hit $69,000 and $5,000, respectively. Fueled by the DeFi boom and the NFT craze on Ethereum, the latest crypto bull market was in full swing until the end of 2021.
2022 Bear Market
From the start of 2022, investors became bearish again, and several notable events, such as the collapse of Luna, the implosion of several centralized crypto lenders, and the downfall of FTX, led to crypto asset values dropping significantly, with some cryptocurrencies losing more than 95% of their values.
Bull and bear markets will always occur and significantly influence your investments. Thus, it’s advisable to know how to identify the current crypto market cycle before making an investment decision.
While bear markets are undoubtedly scary, they are a normal part of the crypto markets and may provide buying opportunities for investors who can stomach the risk and can afford to wait until the next potential crypto bull market.
Frequently Asked Questions
What is a bull market in crypto?
A phase where crypto prices rise and are expected to continue rising, often following Bitcoin halving and marked by positive investor sentiment.
How does a bear market differ from a bull market?
A bear market features declining asset prices and negative sentiment, with investors expecting further decreases and often coinciding with economic slowdowns.
What historical events have influenced past crypto bull markets?
Events like Bitcoin halving have historically preceded crypto bull markets, with price surges due to limited supply and increasing demand.
Can investing in a bear market be advantageous?
While risky, bear markets may offer buying opportunities for long-term gains for those who can assess the market cycle correctly and wait it out.
What are the signs of a crypto market bull run?
Signs include steady price increases, high market confidence, increased media coverage, and growing interest from various investor types.
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Note: Any cited numbers, figures, or illustrations are reported at the time of writing, and are subject to change.