Cryptocurrencies and blockchain technology are a whole new world with jargon and terms exclusive to them. If you are new to the world of crypto, you will come across terms that seem to have strange meanings. The world of financial asset trading is even more notorious for its exclusive terminologies. Since cryptocurrencies are now largely regarded as financial (digital) assets, the trading jargon also applies to the crypto market. Words like bullish and bearish are now commonplace in the crypto space. Mentions of a bullish market are widespread across social media whenever crypto prices are generally on the increase. When there is a steady or sharp decrease in crypto prices, people talk about a bearish market. https://twitter.com/TheCryptoLark/status/1461629571409670153?s=20 What are these two terms, what do they have in common, and how far apart are they in terms of meaning? Bear Vs. Bull.
History Behind The ‘Bullish and Bearish’ Terms in Crypto Trading
From the early days of the financial markets, where stocks and currencies were the major commodities traded, traders have coined words to communicate market sentiment amongst themselves. Mirroring the approach of two animals to conflict situations, traders named the sustained rising or falling of market prices after bulls and bears. Bulls generally charge at their enemies head-on, trying to flick them upwards with their horns. Bears, on the other hand, stoop and attempt to attack from a low position. These two striking stances made traders compare opposite market conditions to the animals; hence, traders are called bulls or bears, depending on the sentiment they support. The idea of bulls and bears relies heavily on market sentiment. Traders depend on their instincts, professional advice and opinions to make decisions in the market. These opinions are regarded as market sentiments and can be held by one person or a group of people. Certain factors like indicators, news, and candlesticks help traders develop a market sentiment, bringing up the bullish or bearish terminology.
What Does Bullish Mean?
When prices are on a steady increase, we say the market is bullish. A crypto trader uses the word ‘bullish’ when crypto prices are experiencing a sustained and considerable increase and the demand for digital assets supersedes the supply. Between March and early May in 2021, cryptocurrencies recorded a massive upsurge in prices, with Bitcoin hitting highs of up to $65,000. The atmosphere around the market was buzzing and many even predicted a run-up to $100,000 for Bitcoin. There was a general tendency to buy and hodl coins, with great optimism that prices would increase— a perfect scenario of bullish market sentiment. Golden Bitcoin bull. When traders say the market is bullish, it is usually after a sharp spike in prices of up to 20% or more. At such times, buying pressure increases significantly and more money flows into the market. Prices go upwards, and we say that it is bull season. Usually, in the crypto market, the increase in the price of Bitcoin kickstarts the bullish sentiment. In such periods, traders take more long positions— buys— and expect to sell at higher prices for a profit. If you stick around long enough during a bullish run in crypto, you will often come across statements like ‘we are heading to the moon’.
What Does Bearish Mean?
Bearish market sentiment is formed when crypto prices experience a sharp or steady decline of up to 20%. At such times, there is increased selling pressure, and most traders short the market— to go short in trading means to sell an asset or to exit a buying position. After Bitcoin and other cryptocurrencies experienced massive gains in the first quarter and part of the second quarter of 2021, the world was unprepared for what came next. In one fell swoop, Bitcoin prices crashed to a low of around $29,000 from levels above $60,000. That one move signaled the beginning of a bear run in which the prices of most cryptocurrencies fell sharply over a sustained period. The bearish sentiment was so severe that many projected that Bitcoin would return to lows of $10,000 or may even die out entirely. Bearish on Bitcoin. During bearish market conditions, most traders take short positions and sell their crypto holdings to take profits or exit losing positions. Demand levels drop significantly and selling pressure increases, leading to a crash in prices. At such periods, we say that the bears are winning.
Differentiating Bullish from Bearish
In crypto trading, a bullish market is the direct opposite of a bearish market.
- Price: In a bullish market, prices are expected to increase while traders experience a fall in prices in a bear market.
- Demand and supply: The demand for cryptocurrencies and buying pressure increases during a bullish market. In a bearish market, demand falls, and selling pressure increases.