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Differences Between Bull and Bear Market

by Sandip Das from
Differences Between Bull and Bear Market

Any serious investor needs to be aware of the differences between bull and bear markets. This is because the investing strategy that works best in the bull market may not be as effective in the bear market. This article explains everything you need to know about bull and bear markets. So, let’s begin

1. What is a Bear Market?

Every day the prices of stocks, commodities, or crypto go up and down continuously. These short-term fluctuations in price are an integral feature of the market. However, if you look at the market for a slightly longer term (for a few weeks, months, or even years), you would generally observe that there is an uptrend or downtrend.

In the uptrend, prices keep going up for a longer term. While in the downtrend, the prices tend to go down. The first one is associated with a bull market and the second one with a bear market. So, what is a bear market?

The bear market is the phase of the market cycle when prices of assets, like cryptos, tend to go down. For instance, if you look at the crypto market in 2022, the prices of most cryptos kept falling throughout the year. So, this was a bear market for cryptos.

Some of the common characteristics of a bear market are investors’ pessimism, falling prices, and a lack of enthusiasm in the market or even a market panic. So, the bear market is generally the unwanted phase of the market. Who wants to see prices going down every other day? But, we love the bull market.

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2. What is a Bull Market?

A bear might attack its opponent by swiping it down, but a bull likes to thrust its horn up into the air. So, if the bear market is associated with a downtrend, the bull market is related to an uptrend. In a bull market, prices of assets keep going up over a period. For example, in 2021, the price of almost any crypto was going up like crazy! Bitcoin’s price increased by 70% in 2021 alone. This was a roaring bull market.

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Investors love a bull market because prices tend to go up consistently in this type of market. Some of the main characteristics of a bull market are investor’s confidence, optimism about market returns, soaring price levels, and higher investments. Even with the many differences, there are certain similarities between bear and bull markets. Before we address these similarities, consider purchasing your crypto at one of our favourite exchanges using our referral code for BTSE.

3. Similarities Between Bull and Bear Markets

The first similarity between bull and bear markets is that both these market phases tend to have underlying economic factors. For example, positive economic performance and outlook can trigger a bull market. On the other hand, economic concerns like slow growth or higher unemployment can trigger a bear market. 


Secondly, both bull and bear markets can provide investment opportunities. If prices are going up quickly in a bull market, in a bear market you will get to buy many assets at a highly beaten-down price to profit later.

Thirdly, in both bull and bear markets, there is a clearly identifiable trend rather than a market consolidation. Such clear trends help investors build clear investing strategies. Now, let’s look at the bear vs. bull cycle.

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4. Differences Between Bull and Bear Market

Bear and bull markets have more differences than similarities. Let’s look at thekey differences between bull and bear markets:

Market phase Bear Market Bull Market
Price trend Prices tend to go down. Prices tend to go up.
Investors sentiment Negative and pessimistic Positive and optimistic
Duration Bear markets tend to be shorter in duration than bull markets. Historically, the average duration of a bear market has been 1.3 years. Bull markets tend to be longer in duration than bear markets. Historically, the average duration of a bull market has been 6.6 years.
Extent of price changes It’s officially a bear market when prices have fallen by more than 20% from the recent peak. It’s officially a bull market when prices have risen by more than 20% from the recent lows.

Looking at the differences, you can decide which market cycles we are in. Now, you may be thinking about what economic indicators are often associated with bull markets/bear markets. A bear market is generally associated with negative economic indicators like rising unemployment, higher interest rates, or lower GDP. On the contrary, a bull market is associated with positive economic indicators like higher economic growth, lower unemployment, or lower interest rates.

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5. How to Invest During a Bear Market vs. Bull Market

Investing in bull markets is quite different from investing in bear markets. Since the prices of most assets go up in a bull market, any crypto token seems to be profitable this time. For example, Dogecoin (DOGE), which is basically a memecoin, soared about 23,000% in 2021. Note that memecoins have no real usage, and they are created just as jokes!

So, in a bull market, the best strategy is to buy strong assets that are performing better than others. If you invest in these leading assets in a bull phase, they are likely to give you lucrative returns throughout the bull market duration. However, you need to have sufficient risk management strategies to protect your capital.

One of the most effective bear market investing strategies, is called bottom fishing. In this investing style, we search for good assets, the prices of which have come down heavily. For example, if you think BTC is a good investment and its price has come down significantly in a bear market, you can invest in it to profit later in the bull market. So, you need to divide effective bull vs. bear market trading strategies to benefit from both markets. Also, if you have already decided that you want to start investing in Bitcoin then check out our guide on how to buy Bitcoin online.

5.1 Short-term vs. long-term investing

Long-term and short-term investors approach bull and bear markets in different ways. Long-term investors have a time horizon of several years. So, they try to buy assets at a bargain price in the bear market to get exponential returns in the bull markets.

On the other hand, short-term investors have a time horizon of a few weeks or even days. Many short-term traders close their trades on the same day. They are called intraday traders. These types of traders try to book profits from short-term price fluctuations in both bull and bear markets.

5.2 Investing Strategies: Momentum, Trend, and Breakout

Investors need to look at investing trends and market cycles to develop profitable investing strategies. There can be several investing strategies like momentum, trend following, and breakout trading.

In momentum investing, we buy an asset that is constantly growing in price. The idea behind momentum investing is that the price trend will continue in the future. Therefore, the price will keep growing for some time in the future. Trend following is similar to momentum investing, in which we look at the price trends (uptrend or downtrend) to plan our trades.

Lastly, in breakout trading, we keep looking for market opportunities where the price of an asset breaks a price resistance and reaches new heights. Price resistance is like a price barrier which was difficult for an asset to break earlier. The breakout indicates that the asset is now ready to move up further and reach new price levels. Breakout trading can be extremely profitable if done in the right way.

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5.3 Risks and rewards

Investing is all about balancing risks and rewards. There is a trade-off between risks and rewards. So, higher returns generally mean we need to take more risks. So, we need proper risk management strategies to protect our capital at all costs.

The first rule of investing is to protect your capital so that you can continue your trading business. One way of managing risk is calculating the risk-reward ratio. It is the ratio of the potential return from a trade and the potential loss. A risk-reward ratio of 1:3 means you risk $1 for every $3 of potential reward. This type of risk-reward ratio is profitable in the long run.

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6. Key Takeaways

Fluctuations in asset prices are part and parcel of the market. However, in the bull and bear markets, there are clear price trends. We can see price uptrends in bull markets and price downtrends in bear markets. Bull and bear markets appear periodically in cycles. We need to deploy different trading and investing strategies to profit from both markets.

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7. Differences Between Bull and Bear Market - FAQs

7.1 🐻 How long does a bull or bear market last?

Each bull and bear market is unique. There is no standard duration for a bull or bear market. In the case of stocks, the historic average duration of a bull market is 6.6 years while the same for a bear market is 1.3 years.

7.2 🐮 Are we in a bull or bear market in 2023?

From the beginning of 2023, we can see a clear uptrend in the crypto market. Prices of cryptos are consistently moving higher after the 2022 lows. So, this looks like the beginning of another bull market.

7.3 ⚡ What is the main difference between a bull and a bear market?

The main difference between bear and bull markets lies in the price trends. In the bull market, asset prices have an uptrend. On the other hand, asset prices experience a downtrend in bear markets. Knowing the differences between bear and bull markets helps us devise profitable investing strategies for both these markets.

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Comments (2)
SportMuffin
SportMuffin 7 months ago
this bull market is taking its sweet time 😒😒😒
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