The term bull market, or bull run, refers to an upward trend in the value of an asset, like a cryptocurrency. A crypto bull market often follows an aggressive upward direction reflecting rising prices in a fairly short time window.
Understanding Bull Markets
A bull run represents the upward trend in the value of a cryptocurrency. The term is borrowed from traditional stock market, but cryptocurrencies deal with much larger margins of increase as they are traded in much smaller and more volatile markets.
While stock market may consider a 20% increase as bullish behavior, cryptocurrencies are much more volatile, meaning that even a 40% increase in value is possible in the span of one or two days.
A bull market reflects confidence in the asset, which can be attributed to the product's performance or other market indicators.
Bull and Bear Markets: Differences
The terms bull and bear markets are borrowed from the traditional stock market terminology.
A bear market is the exact opposite of a bull market, and it follows a downward trend in the trust in the asset and value, characterized by pessimism regarding the markets. It’s often called the seller’s market, as investors increasingly cash out and subsequently drive the asset's price down. In bear markets, supply (sellers) typically outweigh demand (buyers).
A bull market is also referred to as the buyer’s market; it represents confidence in the asset and markets and channels optimism instead. As it’s said often, bull runs can’t last forever: markets typically follow a cyclical pattern of bull and bear periods where buyers and sellers are more active, respectively.
According to the University of Idaho’s research, the US markets have gone through 11 bear and bull market periods, also called cycles, since 1926 The average bull market period lasted 6.6 years and returned an average cumulative return of 339%, whereas the average bear markets lasted 1.3 years with a loss of -38%. 8 of 11 bear market periods coincided with a recession.
Spotting a Bull Run in Crypto Markets
A bull market typically emerges following sustained periods of sellers exiting the market and stock prices being flattened out. This phase is referred to as accumulation, where long-term investors hope to buy in bulk for low prices and hope for a bullish rise. The next phase, called markup, marks the beginning of a bull market: buyers increasingly enter the market, and demand begins to outpace the supply.
How do you detect a bull run crypto?
Looking at current cryptocurrency prices is one of the quickest ways to determine whether one is in a bull or bear market. Moreover, rising asset prices indicate market confidence and an incoming bull run. Contrarily, declining asset prices indicate low confidence and an incoming bear markets.
What Causes a Bull Run?
Of course, the occurrences don’t take place in a vacuum. It's the investors and a positive outlook that predominantly initiate a bull run, but it usually coincides with a period of strengthening economy, reflected in a growth in GDP, low-interest rates, and a decrease in unemployment rates.
These factors also influence cryptocurrency markets. Yet, as a smaller and newer market, other unique factors may also trigger a bull run in cryptocurrency prices. Historically, cryptocurrencies have experienced spikes in value due to endorsements from public figures, expressions of interest from large investors, and unprecedented economic conditions.
Examples of Bullish Behavior
2017 — Stock market was enjoying (but also nearing the end of) the longest bull run ever by 2017, which began around 2009 after the financial crisis and ended in 2020 with a pandemic-induced crash. In 2017, cryptocurrencies, led by Bitcoin, gained the biggest mainstream exposure so far, with celebrities like Jamie Foxx and Paris Hilton participating in endorsement campaigns to attract retail investors.
Initial coin offerings (ICO), digital tokens associated with blockchain-based products like decentralized applications, proved to be a lucrative albeit controversial introduction in the market. They had the potential of raising $30,000 in half an hour but created mixed results of serious crowdfunding and perfect opportunities for grand scams. Ultimately, by mid-2018, the value of 86% of the ICOs listed in 2017 had fallen below the initial offering price.
Nevertheless, these factors combined have increased the value of Bitcoin from $830 to $19,300 in a year, while Ethereum, which hosts the majority of aforementioned projects, jumped from $10 to $715.
2021 — Post-covid crypto market was marked by larger investors taking an interest in cryptocurrencies along with retail investors, and in this sense, it is seen as divergent from the “hype” oriented bull run of 2017.
JPMorgan’s CEO Jamie Dimon famously regarded cryptocurrency as a “scam” back in 2017. In about half a decade, the bank publicly expressed its optimistic outlook on crypto markets. Overall, 2021 saw a 47.4% increase in institutional investors with total global investment, including PE, M&A, and VC, amounting to over $30 billion, an increase from $5.7 billion in 2020. The boom of decentralized finance products on Ethereum also peaked in 2021, with total value locked amounting to over $114 billion at its highest.
While traditional markets crashed due to the disruptions caused by COVID-19, the crypto market cap grew to a record-breaking $3 trillion by the end of 2021. Its generally thought that the declining economic conditions and several streams of relief packages pushed individuals to seek refuge in crypto markets for quick and high returns.
This period ended with creeping fears of recession and hiking interest rates, and the market cap was down to $1 trillion in early 2022.
Will the Bulls Run Again?
As of this writing, the crypto market is going through a period of depressed stock prices and devaluation following the 2022 crash. Although there have been over 400 obituaries written for Bitcoin to this day, Bitcoin and other cryptocurrencies powered through four of these periods in the past — that being said, it is not enough historical data to suggest a definite comeback.
Yet, the market for cryptocurrency and blockchain-associated technologies continues to be in development and has been attracting new users gradually: the number of wallets has actually jumped to 84.02 million worldwide in 2022, from 76.32 million in 2021. For many experts, these are a sign of a rising market and a potential bull run in the future.
