The term bull market refers to a positive trend in the prices of a market. It is broadly used not only in the cryptocurrency space but also in the traditional markets. In short, a bull market concerns to a strong market uptrend that presents meaningful rising prices over a relatively short period of time. When compared to traditional markets, cryptocurrency markets are smaller and consequently more volatile. Therefore, it is quite common to see strong and consistent bull runs, where a 40% price increase in 1 or 2 days is quite common.
Although the term bull market can be used loosely to refer to any strong market activity, it is often utilized in traditional markets when the price of an asset rises 20% or more from its previous low point. Typically, a bull market arises when investors are optimistic about the future performance of an asset or the overall market indexes.
Historically, there have been a number of factors that contribute to the emergence of a bull market. In traditional exchange markets, a strong gross domestic product (GDP) and low unemployment numbers are some of the factors that often produce favorable market conditions, causing investors’ confidence to increase. These factors can also create an indirect impact on the cryptocurrency markets, but as the crypto space consists of a smaller niche, it tends to behave in a particular way and is not always correlated to traditional markets or economic indexes.
While a 20% increase in market prices is often regarded as the start of a bullish trend, most signs of an impending bull market are not that clear. Traders and analysts use various tools and systems to help them recognize signals and trends. A few examples of technical analysis indicators include moving averages (MAs), the Moving Average Convergence Divergence (MACD), the Relative Strength Index (RSI), the On-Balance Volume (OBV).
Bear vs. Bull Markets
The opposite of a bull market is a bear market, which takes place when investors are feeling pessimist. Falling prices (bearish trend) create a negative market sentiment and as traders feel less confident, they tend to sell more and more, causing a further decrease in prices and often what is known as capitulation.
Economists say that between 1929 and 2014, there have been 25 bull markets and 25 bear markets in the US. The average bear market loss was -35%, while the average bull market gain was roughly +104%. These trends reflect how market momentum sustains the continuous price increases (on bull markets) and decreases (on bear markets).