Bullish vs Bearish Markets: When to Buy and Sell Cryptocurrencies
The cryptocurrencies market, like any financial market, is governed by highs and lows, causing investors to swing between panic or celebration as prices are plunged into lows or soar to new highs.
For any investor, but especially for the crypto investor, it is crucial to know the difference between bullish vs bearish markets and, most importantly, what should be your reaction in each scenario? When is it best for you to buy cryptocurrencies and when should you sell?
What is a crypto bull market?
A crypto bull market is a period of time when an asset’s value is rising as investors are buying more than usual. This causes the demand to surpass the supply as market sentiment is positive.
What does bullish mean?
Bullish refers to an investor that is confident a particular asset or the whole financial market, such as the cryptocurrency market, will rise higher. If there are enough investors who share the same confidence, this can lead to the market rallying even further.
What is a crypto bear market?
Opposing the above, a crypto bear market is when the market is experiencing a downward trend and assets experience a fall of 20% or even more. It’s good to remember that this doesn’t necessarily have to be a negative thing as there are ways to capitalise on such a drop in the market.
What does bearish mean?
Being bearish is when an investor believes that the market will experience a drop, leading to a number of investors potentially selling their assets. This may cause the prices to drop even further.
Bullish vs Bearish Markets: Characteristics
Both scenarios present positives and negatives to the savvy investor. Let’s take a look at these characteristics in the below lists:
Crypto bull market characteristics:
- Cryptocurrencies are in demand and are usually featured more in the mainstream
- Large amount of trading (buying and selling)
- High liquidity (very easy to sell an asset and convert it into cash)
- Crypto mass adoption is on the rise
Crypto bear market characteristics:
- Less demand for cryptocurrencies
- Investors trade much less
- Liquidity is low
- Market sentiment is very low
Bullish vs Bearish: When do you buy and sell?
Do you buy or sell cryptocurrencies in a bull market?
A bull market is synonymous with prosperity and a rise in value. If you were savvy enough to predict a bullish trend before the markets rallied, then you would have been smart enough to buy early. Then, when the prices climb higher and higher your next problem will be identifying when the market will reach its most bullish peak and deciding when it is best to sell your cryptocurrency at a higher price.
If you have not managed to buy an asset before the market peaked, then keep in mind that according to experts, cryptocurrencies tend to drop in price at the end of a bullish trend. It might be worth your time to keep an eye on certain coins throughout a bullish trend and act quickly if you sense a drop in value.
Do you buy or sell cryptocurrencies in a bear market?
Conversely, it makes sense to buy during a bear market scenario given prices are low. However, investing during a bearish scenario means you should be prepared for the possibility that the bottom hasn’t yet arrived.
Your challenge when investing during a bear market will be not knowing how long the dip will last, which might lead you to buy early or too late. So hold on tight, reduce the urge to sell, keep an eye on general market sentiment and stay informed on any news that might cause movements in the market. If you’re hoping to make long term gains get prepared to buckle up and HODL.
To buy or to sell?
Buying or selling in a bullish vs a bearish scenario is as distinct as night and day. Both scenarios present a set of risks to investors, however, learning what are the main factors that drive each market as well as staying updated with the latest cryptocurrency news and studying past trends can help you minimise the risks involved and capitalise on each scenario. Good luck out there!
As always, this article does not constitute financial advice and you should be sure to do your own research and consult a professional financial advisor before making any investment decision.
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