In crypto, the terms “bull” and “bear” are used to describe the general direction of price action over any given period of time. These terms started in the traditional stock market but have carried over into crypto, and debatably have even more relevance now considering the volatility of this new asset class.
What is a bull market? Why is it called a bull market?
A bull market is what we call a market that is trending upwards. Prices are rising, investors are confident, and the asset class is growing. When demand for an asset is greater than its supply, that causes price to increase, so you can think of a bull market as a sustained period of high demand from market participants.
There are multiple theories for where the name “bull market” came from, but the most common is that these upward markets resemble the fighting style of a bull. When in attack mode, a bull charges ahead and thrusts its horns upwards in the air. Thus, a bull market is one in which price action pushes forward and drives upwards.
How long does a bull market last?
Parabolic moves are quite common in crypto, where assets can return multiples on their value in very short amounts of time. It’s what makes crypto so exciting.
The average crypto bull market lasts about 1 year, and crypto has gone through 3 major bull markets in the 11 years since Bitcoin (BTC) became available on public exchanges. In 2013, BTC peaked at nearly $1,200 after trading for $10 just a year earlier. In December 2017, Bitcoin hit $20,000, more than 25 times what it was priced 12 months before. The most recent crypto bull market happened in 2020-2021, when Bitcoin went from $11,000 in October 2020 to $65,000 in April 2021.
How is a bull market related to speculation?
Every 4 years, the Bitcoin protocol experiences something called “The Halvening,” where miner rewards are cut in half, and the amount of BTC added to the market every day becomes more scarce. Historically, this is about the time when the price of Bitcoin starts to move and begins a new bull market. Some would argue this movement is scarcity driven, as less supply with equal demand initiates an increase in price, but it’s also true that price can start moving in anticipation of The Halvening, indicating there is speculation involved to some degree.
The further along an asset gets into its bull market, the more human emotions play a role. As price increases, people start talking about how much they’ve made, news outlets report on the positive price action, and people who missed the move start to buy in, in hopes of catching another surge upwards. These “FOMO” buyers are acting in a speculative fashion, and are usually the first to sell at a loss when things turn the other direction.
What is a bear market? Why is it called a bear market?
Bear markets are the opposite of bull markets. It’s a time when prices fall, news coverage is generally negative, and people tend to become nervous and sell. In crypto bear markets, the conversation shifts from how exciting the asset class is to whether or not it will ever recover. Because of how early we are in crypto, there are many projects who never recovered after experiencing a bear market.
Contrary to a bull who thrusts its horns up when fighting, a bear attacks by swiping its paws downwards. For this reason, markets that are moving in a downward direction have been labeled “bear markets.”
How long does a bear market last?
There’s no exact length we can assign to a crypto bear market, but similar to the bull markets to date, they typically last around 1-2 years. With Bitcoin in particular, we normally see a 1 year drawdown of around 80%, followed by a year of price consolidation. Once that cycle is complete, a new bull market typically begins.
The first bear market in Bitcoin went from November 2013 - January 2015, when Bitcoin fell from $1,200 to $152 before moving sideways for a year and starting an uptrend in October 2015. Another BTC bear market took place in 2018, when price dropped from $20,000 to $3,100 over a 12 month span. A third bear market started in November 2021 when Bitcoin was at $69,000 and dropped to a low of $17,500.