Source: Cointelegraph
Original text: (Is it a bull market or a bear market? How to distinguish between the two)
Not sure if you are in a bull or bear market? This guide explains how to distinguish between the two through price trends, trading volume, market sentiment, and on-chain data. Learn how to identify market cycles, which signals to pay attention to, and how to adjust your strategy for each stage to make your trading smarter.
The cryptocurrency market resembles an emotional rollercoaster, with prices soaring one month and plummeting the next. If you’ve ever been confused about whether you are in a bull or bear market, rest assured, you are not alone.
In short:
A bull market refers to a period of sustained price increases, high investor sentiment, and an atmosphere generally filled with optimism. Looking back from the end of 2020 to early 2021; Bitcoin (BTC) soared from around $10,000 to nearly $70,000. New projects emerged like mushrooms after rain, as everyone from your cousin to Uber drivers seemed to be investing in cryptocurrency.
Conversely, a bear market is a period of sustained price declines, with investors pulling out and market sentiment sharply deteriorating. A typical case? 2022. After hitting an all-time high, the market turned sharply. Bitcoin fell below $20,000, projects collapsed one after another (remember Terra?), and even seasoned traders began discussing the topic of 'building in a bear market.'
Understanding the current market state helps you make more informed decisions, which is where its importance lies. You wouldn't want to blindly invest in meme coins during a downtrend, nor would you want to panic sell just before the market is about to rebound.
Identifying market cycles can help you invest more strategically, manage risks effectively, and most importantly, maintain emotional stability. In the cryptocurrency space, emotional control is half the battle for success.
Did you know? In the 18th century, the 'bearskin traders' in Britain were early short sellers who sold bear skins they did not yet own, betting that prices would fall. The proverb 'Never sell the bear skin before you catch the bear' has since spread, and similarly, the term 'bull' emerged later, not only as the opposite of 'bear' but also named for the upward thrust of a bull’s horns when it attacks.
Indeed, cryptocurrencies appear as 'numbers on a chart'. But behind them lie stories, headlines, and the ever-changing sentiments of the entire community. Here’s how to understand bull and bear cycles:
a) Continuous price increases
Price increases in a bull market are inevitable. More importantly, these increases are often sustained, lasting weeks or months. You will observe mainstream coins steadily rising while altcoins also benefit.
A textbook case? Bitcoin's surge from around $10,000 to $69,000 in 2020-2021. This wave of growth was driven by strong momentum, institutional support (from Tesla, Strategy, etc.), and significant retail fear of missing out (FOMO) psychology.
For example, Dogecoin's meme-driven surge at the beginning of 2021, from a joke identity to a leap to $0.45, was due to Elon’s tweets and the enthusiastic support of the Reddit community.
b) Positive investor sentiment
When Platform X is filled with a joyous atmosphere and everyone predicts BTC will 'fly to the moon', and new projects emerge with sky-high valuations, you can sense that the market sentiment is bullish. Capital flows accelerate, and even high-risk investments are seen as obvious opportunities. This is a clear sign of positive investor sentiment saturating the market.
c) Favorable economic indicators
Bull markets are often accompanied by low interest rate environments, convenient credit access, and overall technology-friendly economic conditions. For example, during the 2020 bull market, pandemic-era economic stimulus checks and low-cost borrowing provided retail and institutional investors with more capital to invest in digital assets.
a) Long-term price decline
Bear markets usually last a long time. Prices drop, and then continue to fall, with each small rebound being immediately swallowed by a wave of selling. Recall the 'crypto winter' of 2018, when Bitcoin plunged from $20,000 to about $3,000.
Or the brutal decline of 2022, where BTC fell from $69,000 to below $20,000. That crash was not just about prices; it was propelled by a series of collapses including the Terra-Luna, Celsius, and FTX scandals. The domino effect continued to spread.
The atmosphere in a bear market often feels like the feast is over.
b) Negative investor sentiment
In bear market phases, fear sentiment dominates completely. News headlines become pessimistic, social media activity declines, and even staunch believers begin to question their investment philosophies. Funding channels shrink, development teams go silent, and jokes about 'exit liquidity' start circulating.
c) Adverse economic environment
Macroeconomic headwinds exacerbate the situation. High interest rates, inflation concerns, or tightening monetary policy typically worsen market conditions. For example, in 2022, the Federal Reserve’s aggressive rate hikes significantly reduced the attractiveness of risk assets, including cryptocurrencies.
Key indicators for identifying market phases. Although no single indicator can provide 100% certainty, industry traders and analysts still rely on some time-tested important indicators. In addition to the obvious price, let’s analyze other indicators you can refer to.
Trading volume reveals the confidence behind price movements.
In a bull market, price increases are usually accompanied by strong trading volume support. More buyers enter the market, increasing market liquidity, providing solid support for the upward trend.
During bear markets, trading volume often significantly decreases. Price declines face weak buying pressure, and the market appears neglected.
Low trading volume combined with price declines? If you are expecting a market rebound, this is certainly not a good signal.
Industry data: During the 2021 bull market, Dogecoin experienced explosive growth in trading volume, approaching $70 billion in daily trading volume when its price climbed to $0.45.
An important tool that many investors rely on is the Crypto Fear and Greed Index. This index assesses whether investor sentiment is optimistic (greed) or pessimistic (fear) by monitoring factors such as social media activity, price volatility, and Google search trends.
Extreme greed often occurs at the market top.
Extreme fear tends to appear near market bottoms, but it may persist for a long time during deep corrections.
Monitor market trends daily, but do not let them completely dominate your investment strategy. Market sentiment indicators can only reflect the current state, not serve as accurate tools for predicting the future.
Even if you are not a technical analysis expert, you can identify some valuable market signals.
Moving averages: When prices consistently run above the 200-day moving average, it is usually seen as a bullish signal. Conversely, when prices fall below this moving average, it often signals that the market may turn. Note that these are tools for long-term trend judgment, not indicators designed for day trading.
Relative Strength Index (RSI): This indicator is specifically used to measure whether an asset is overbought or oversold: when the RSI reading exceeds 70, it indicates that the market may have overheated and faces the risk of a pullback; when the reading is below 30, it may mean that the asset is severely oversold and has high rebound potential.
These are not hard and fast rules, but they help you feel the market dynamics.
Sometimes, the biggest market drivers do not appear on the charts.
Bullish signals may include:
Adoption by large institutions (e.g., BlackRock applying for a Bitcoin ETF).
Regulatory news or court victories that are friendly to cryptocurrency businesses.
Major technological milestones (e.g., Ethereum upgrades or the launch of Layer 2 networks).
At the same time, bearish signals typically manifest as:
Regulatory crackdowns (SEC targeting major exchanges).
High-profile security breaches or protocol failures.
Global instability—inflation, war, or financial contagion.
Once you understand which indicators to focus on, the next step is to determine where to obtain this information. Fortunately, there are many free tools available in the cryptocurrency space, provided you know how to use them.
If you want to deeply understand price trends, reliable charting tools are indispensable.
TradingView is renowned for its highly customizable charts and rich technical indicators.
Cointelegraph provides a clear overview of price, market cap, and trading volume trends, which is particularly useful for tracking emerging or low-market-cap tokens.
Did you know? TradingView's charting tools are directly integrated into several top global cryptocurrency exchanges, including Binance, Bybit, OKX, and Bitget.
The cryptocurrency market is more driven by emotions than pure mathematical models.
Tools like LunarCrush specifically track social media activity, influencer dynamics, and trending tokens. If Dogecoin heats up again, you are likely to be among the first to spot clues on such platforms.
Want to know the movements of whale investors? Professional platforms like Glassnode and CryptoQuant can present key data such as wallet fund flows, miner activity, and exchange balances. These indicators act like the 'ECG' of the blockchain, allowing investors to capture signals of fund migration before price changes.
Understanding market cycles is one thing, knowing how to act on that is another. Your investment strategy should be flexibly adjusted based on whether you are in a bull market or a bear market.
Follow the trend: When market enthusiasm is high, going with the flow is often a wise move, but strict discipline must be maintained. Focus on assets with strong upward channels, and do not blindly chase uptrends without a solid plan.
Take profits: Set clear goals and execute them decisively. When the market is generally bullish, it’s easy to breed greed, but taking profits in stages during an uptrend can effectively avoid the regrettable 'rollercoaster experience': watching your gains evaporate quickly during subsequent pullbacks.
Risk management: Even in bull markets, pullbacks can occur. Use stop-loss or trailing stop orders to lock in profits and guard against sudden reversals. This precaution will prove its worth.
Defensive positioning: Sometimes, the smartest trading decision is not to trade. Converting part of your portfolio to stablecoins or concentrating on relatively low-volatility assets like Bitcoin and Ethereum (ETH) can effectively preserve capital during market panic.
Dollar-cost averaging (DCA): Trying to precisely capture market bottoms? It's extremely difficult. The DCA strategy helps lower average costs by spreading entry points over different times, allowing investors to maintain market participation without taking on excessive risks.
Focus on fundamentals: Bear markets strip away market noise. Projects that can survive in adversity typically possess real application value, strong teams, and long-term development visions. If you decide to hold during market downturns, make sure your decisions are based on sufficient and reasonable grounds.
Regardless of bull or bear transitions, the cryptocurrency market never stops, but that does not mean you must react to every market move. Price trends, market sentiment, changes in trading volume, and fundamental analysis can help you determine the current cycle phase. Equip yourself with the right analytical tools and maintain calm thinking, allowing you to filter out market noise and make clear decisions.
The market always favors prepared investors, and understanding whether you are in the realm of a bull market or the territory of a bear market is one of the most powerful investment tools you can possess.
Happy trading!
