Bull vs. Bear Markets and Trading Strategies (2024)

The ‘Bull’ and The ‘Bear’ – the two most popular avatars for financial markets – are used to represent the general market sentiment or price movement ie rising or falling.

In a ‘bull’ crypto market, the price of the cryptocurrency is rising, and investors and traders are feeling confident to buy the coin with the hopes of selling it at a higher price in the future.

In a ‘bear’ crypto market, the price of the crypto asset is falling and the general bias for investors and traders is to sell the coin to minimize loss. In a sustained bear market, many traders panic and close their positions.

Every cryptocurrency and asset for that matter goes through a cycle of bull runs and bear runs, and to be a successful trader, you’ll need to know how to tackle both beasts.

In the rest of this piece, we’ll discuss examples of significant bull and bear events, how you can predict each market condition, and strategies to trade bull and bear markets. We’ll also discuss how you can trade bull and bear markets easily on BingX .

Let’s take a dip!

Many traders believe that they are called bull and bear markets in relation to how each animal – the bull and bear – fights.

Bulls generally attack with their horns and try to throw their opponents upwards – hence the bull for price rising.

While bears tend to fight by swiping their paws and claws downwards – hence the bear for price falling.

So how do you spot a bull crypto market? In general, we say we’re in a bull market when the price of a coin rises by 40% from its previous low. And then the bull bias is confirmed when the price starts to make new highs or hits higher peaks.

It is incredibly difficult to predict accurately when price starts a bull run and most times market conditions are known in hindsight. However, when the price breaks a previous high (resistance), especially after long periods of falling price, that may be a signal for a strong bullish run.

Examples of significant bullish markets in crypto (Bitcoin)

Bitcoin (BTC), the first cryptocurrency also holds the record for the highest price of any crypto ever.

A significant bull run started on 20/07/2021 where the price of BTC was $28,000 and continued to rise over the next months to an all-time high of over $68,000 on 10/11/2021.

And how do you spot a bearish crypto market? When the price falls by more than 40% from a previous high, breaks a previous significant low (support), and starts making lower lows, we say we are in a bear market.

Just like the bullish market, you can only know a bearish run for sure in hindsight. However, when the price breaks a previous low, especially after long periods of rising price (bullish runs), that may be a signal for a strong bearish move .

Examples of significant bearish markets in crypto (Bitcoin)

Still using BTC, immediately following the coin’s all-time-high in November 2021, the price continued to fall in a strong bearish run from $68,000 to as low as $19,000 as at the time of this writing:

Whether you think the price is rising or falling, having a proper strategy with risk management will help you minimise loss should the market move against your bias. There are different trading strategies that you can use in bull and bear crypto market conditions. Let’s take a look at some of them.

Buying and Hodl-ing

The easiest way to make money in a bull market is to buy the coins you want, wait, and then sell them at a higher price. This is called hodling the coin. If the price rises, you make a profit. And if the price falls, you make a loss.

Trade derivatives

Derivatives are trading instruments (contracts) that allow you to make money from price movements without needing to hold the coin in your wallet. Some examples are futures, options, and perpetual swaps.

Derivatives are great because you don’t have to fulfil them if the trade will result in a loss for you – you only pay the fee for purchasing the contract.

You can trade Standard Futures on BingX. These are best suited to young traders and you get a simple-to-use interface:

And if you are an experienced trader, you can trade Perpetual Futures on BingX:

Take profits early

It is important to know when to take your profits in a bull market. Set your positions to close once the price hits key points where you suspect there may be a reversal.

During a bull market, many traders get greedy and want to wait for price to reach its absolute highs before closing. In reality, no one knows for sure when price will reverse and leaving your positions open for too long exposes you to more risk.

It is important to set profit targets in your strategy and stick to them.

Invest in quality altcoins

In a bullish crypto market, money pours in and more altcoins tend to be created, creating great investment opportunities.

A quality altcoin can launch for fractions of a cent and multiply to several tens or hundreds of its initial price if there is a lot of investment interest. They have the potential for larger profit margins than already-established coins like BTC or ETH.

However, trade new altcoins carefully and only invest small amounts as many of them are just hype. Great altcoins to look out for coins include those with novel technologies and backing special projects.

Some great examples of quality altcoins are Cardano (ADA), Ripple (XRP) and Solana (SOL).

ADA is the native coin of the Cardano blockchain and is one of the earliest adopters of the Proof of Stake (PoS) mechanism. ADA mainly functions as a cryptocurrency and allows you to make transactions but recent use cases as a platform to power De-Fi and NFTs have come up.

XRP, the cryptocurrency developed by Ripple Labs, runs on a unique mechanism where the coins have been pre-mined. The company describes itself as a decentralized payment platform enabling international transactions to be carried out swiftly.

SOL is the native coin for the Solana blockchain and is considered the fastest in the world at the time of this writing. It was designed to become the most ‘censorship-resistant network’ and runs on a unique Proof of Stake and Proof of History hybrid validation system. Solana is an open-source network, and in addition to enabling transactions, can be used to create De-Fi platforms, dApps, and NFTs.

Convert your assets to stablecoin

The easiest way to protect your portfolio from losses in a bear market is to convert your crypto assets to stablecoin like [USDT or USDC](hyperlink to USDT vs USDC article). By doing that, you can avoid market volatility and invest again when prices go bullish.

Trade derivatives

In a bearish market, you can trade derivatives to minimize losses incurred from coins in your wallet by hedging. With a derivative, you can open an opposite position that only triggers when the price of the underlying asset falls below a point.

Derivatives also allow you to leverage, however, leveraging increases your risk and if the price goes against your bias can also mean multiplied loss. So, your risk management should be on point.

Trade like the institutions

Institutional traders and large corporations trade against the general bias of the market. In a bearish market, while other traders are panicking and closing their positions, institutional traders buy as the price falls.

If price eventually reverses early enough and goes into a bullish run, you can make more profits as you were able to buy the coin at a much lower price.

On the reverse, there is still the risk that the price will continue to fall and take out your stops.

Diversify your portfolio

Every investor agrees to the idea of diversifying your crypto portfolio – trading multiple coins and not just one coin.

Trading multiple coins minimises your risk because while one coin may be experiencing downtime, the others can still be going strong.

So don’t put all your eggs (your investment capital) in one basket (a single coin or project).

Invest in phases (dollar-cost averaging)

Another important tip is to invest in phases also called dollar-cost averaging. Whether you are going long or short, it is better to spread your capital into smaller positions at different price points.

In a bullish market, you can set entry and take profit positions at different key reversal points.

And if you believe the price will reverse soon in a bearish market, you can open long positions at consecutive positions as price falls to minimize risk and increase your potential profit margins.

BingX is the world’s leading social trading platform. If you are a new trader, using BingX copy trading, you can copy the strategies of elite traders with many years of experience and start earning right away.

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