What is a bull market?
A bull market refers to generally favorable economic conditions. It means that a market is on the rise and is also usually accompanied by positive investor sentiments concerning the current uptrend.
There is a sustained increase in asset prices in a bull market, accompanied by a strong economy and high employment levels.
This applies to cryptocurrency markets as well as traditional markets. In cryptocurrency, however, it is more common to see stronger and more consistent bull-run crypto phases.
What is a bull run in crypto typically like? A 40% increase in price over one to two days is quite the usual scenario. This is because crypto markets are relatively smaller than traditional markets and are, therefore, also more volatile.
The term “bull market” is believed to have originated from a bull’s fighting style, wherein it attacks its opponents with its horns in an upward motion. Today, a “bullish” market or investor usually connotes optimism concerning an asset’s continued rise in value.
In the crypto market, the charging bull heralds a bullish phase for cryptocurrencies. Here, you’ll observe cryptocurrencies growing in value with generally favorable economic conditions and optimistic investors looking to make the most of their rising crypto portfolios.
Briefly put, the investor starts bull markets through the purchase of securities. This can also be done with fiat currency, as bullish markets typically raise the price of securities. The bull market goes on for as long as supply is exceeded by demand. After a while, the bull gets tired, so to speak, and the market shifts and turns into a bear market.
What causes a bull market?
As previously mentioned, investors are the ones who begin a bull market. When they feel that prices will start to rise and continue doing so for an extended period, they start buying stocks (at a low price) and are optimistic about their return on investment (ROI). The increased optimism among investors likewise causes stock prices to continue rising.
There are also other factors that cause a bull market to emerge. Among these are a strong gross domestic product (GDP) and low unemployment rates. Generally, favorable market conditions cause an increase in investors’ confidence. Cryptocurrency bull markets are, likewise, influenced by similar factors to traditional markets.
However, crypto markets are still relatively new on the scene, compared with traditional securities which have been around for hundreds of years. With fewer total investors, crypto may also be driven by factors unique to its niche.
For example, crypto bull runs may be driven by things such as:
- Mainstream and pop culture support: Think of the 2017 bull runs influenced by the likes of Paris Hilton and DJ Khaled, and shows like The Big Bang Theory.
- Introduction of institutional capital: A good example is MicroStrategy’s $650M Bitcoin (BTC) investment (over 70,000 BTC).
- Growing optimism from traditional finance: JPMorgan strategists said Bitcoin could rally to as high as $146,000.
- Unique events that threaten traditional finance: COVID-19, for example, drove a lot of people to turn to crypto amid the stress caused by the pandemic on traditional financial markets.
Characteristics of a crypto bull market
The typical attitudes and actions that characterize a bull market are:
- Increased prices over a sustained period of time;
- Strong demand despite weak supply;
- Increased investor confidence in the market;
- Overpricing of certain projects;
- Insertion of talks about cryptocurrency in mainstream media as well as social media;
- General interest in cryptocurrency among celebrities, influencers and other sectors who might not have been interested in crypto before;
- Hard rise of prices in the event of good news;
- A slight drop in prices in the event of bad news.
What is a ‘bull run’ in crypto?
A bull run refers to an extended period during which a lot of investors are purchasing cryptocurrencies. It’s characterized by the above-mentioned characteristics such as rising prices, demand outweighing supply and high market confidence.
Investor confidence typically drives a positive feedback loop, further extending the bull run (more investments, continued rise in prices). For cryptocurrency, most especially, the price of a given cryptocurrency is largely influenced and driven by public confidence in an asset.