What is a bull market?
A bull market, or bull run, is defined as a period of time where the majority of investors are buying, demand outweighs supply, market confidence is at a high, and prices are rising. If, in a given market, you see prices quickly trending upwards, this could be a sign that the majority of investors are becoming optimistic or “bullish” about the price increasing further, and may mean that you’re looking at the start of a bull market.
Investors who believe that prices will increase over time are known as “bulls.” As investor confidence rises, a positive feedback loop emerges, which tends to draw in further investment, causing prices to continue to rise.
Because the price of a given cryptocurrency is substantially influenced by public confidence in that asset, a strategy some investors use is to try to determine investors’ optimism in a given market (a measure known as “market sentiment”).
What marks the end of a bull market?
Even during a bull market there will be fluctuations, dips, and corrections along the way. It can be easy to misinterpret short-term downward movements as the end of a bull market. This is why it’s important to consider any potential signs for a trend reversal from a broader perspective, looking at price action over longer time frames. (Investors with a shorter time-frame often talk about “buying the dip.”)
History has shown that bull markets don’t last forever, and at some point, investor confidence will begin to decline — this could be triggered by anything from bad news like unfavorable legislation to unforeseen circumstances like the COVID-19 pandemic. A sharp downwards price movement can begin a bear market, where more and more investors believe prices will continue to fall, causing a downward spiral as they sell in order to prevent further losses.
