Regardless of whether the bear market is heading to its end, smart investors are getting their strategies ready for the next meteoric rise. They cannot miss the opportunity to build generational wealth when they can choose from so many crypto projects to add to their portfolios.
Unlike the previous ones, the present bear market has come a little unannounced. On November 10, 2021, the Bitcoin price reached its all-time high of $68,979, and the overall market sentiment was bullish. However, the largest cryptocurrency by market cap stumbled to $17,601 on June 18, leaving people wondering if they should still buy Bitcoin or turn their attention to other stores of value. Since then, multiple events happened in the crypto sector, especially the Merge in the Ethereum network, pointing out that while the market isn’t yet out of the crypto winter, it is taking small steps in that direction. In recent months, numerous signs are pointing to a possible crypto bull run.
Let’s see if you should feel relieved or hold your breath for another couple of months.
What is a crypto bull market?
Before reviewing the market to identify any bull signs, let’s see the definition for this period. Bull markets are described as periods of increased optimism and excitement when more investors join the sector, the demand spikes, and asset prices surge. The first signs that a bull run will take over the market are a spike in crypto prices and investors becoming more confident in the market. Positive sentiments always trigger a higher demand, more investments, and therefore increasing prices. FOMO usually controls the public and fuels the mania of purchasing whatever asset is trending.
Crypto markets are the ideal moments for some investors to ride the rocket ship to the moon and make mammoth gains. However, less experienced investors could get caught up in an irrational exuberance and wipe out their portfolios. It’s challenging to tell when to join and walk away from the market during bull runs. The key is to have a strategy ready to seize any opportunity it might bring.
Major differences between bull and bear markets
Investors love bull markets because they provide them with great opportunities to make a profit. During bull runs, the market is on the rise, crypto prices increase, the economy is stable and strong, and an optimistic sentiment characterizes the overall market. People usually gain revenue during bull markets because cryptocurrencies spike in value, and traders can ride the wave of gains.
On the other hand, investors hate bear markets because they are associated with market decline, a weak economy, low asset prices, crashing projects, and overall negative market sentiment. Portfolios suffer during bear markets because the assets lose their value.
The crypto market goes through cyclic runs and has ups and downs periodically. It’s crucial for investors to stay rational and make objective decisions. If they know when the bull or bear is in charge, they know how to trade accordingly.
Bull runs are different from bubbles
Many beginner investors have the misconception that bull runs and bubbles are one and the same thing. However, they are different market stages. Bull runs are long periods of investor optimism, sustained asset price growth, and increased demand. Bubbles are short periods when asset prices spike without an underlying reason and often cause a frenzy among traders. Bull markets usually enable investors to make significant revenue, as they can adjust their strategies accordingly. On the other hand, bubbles are often financially devastating because they burst when no one expects.
During bubbles, hype quickly grows around some assets, and their prices no longer reflect their actual value. Investors purchase particular commodities based on fear of missing out, and the market becomes overinflated overnight. However, the factors triggering the bubble cannot support such an exaggerated valuation of assets, and the market drops unexpectedly. When the market sentiment turns, the prices drop, and some assets even become worthless.
While bull markets enable investors to protect their gains and leave the market on their own terms, bubbles take away any chance of managing the risk. Unfortunately, sometimes the line between a bubble and a bull market is blurred because they both create hype in the sector. It’s paramount for investors to keep their feet firmly planted and stick to their strategies to ensure they get out of bubbles unscathed.
Signs a new bull run will return
While 2022 ended grimly for crypto investors, the first months of 2023 surprised investors with surges in asset prices. Bitcoin, together with all major altcoins, has registered spikes in value. While the nature of this period is questionable, and experts can’t tell for sure if the market is in a bubble or heading toward a bull run, the following months will definitely tell.
The main telltale signs that a bull run is around the corner are:
Increased trading volume – the higher the trading volume goes, the more investors join the crypto market and hold the assets in their wallets for extensive periods. In these conditions, traders expect significant capital gains.
Higher liquidity – bull markets are characterized by increased liquidity. The latest upgrades in the sector (see the Merge) facilitate lower transaction costs, which trigger soaring returns on investment.
Soaring demand – a positive market sentiment causes an increasing demand. Bull markets are associated with periods when the demand is higher than the supply, and the investors are eager to add the most popular assets to their portfolios. Most traders are looking for new assets to purchase, and few are willing to sell. Fierce competition in the sector will always trigger a price spike.
Improving fundamentals – when assets perform well, and projects prove profitable, companies are more willing to take risks. Bull runs usually encourage business growth, international investment, project upgrades, and product development. Increased profits attract more investors into the sector and drive expansion.
Increased investor confidence – high asset prices fuel public confidence; hence more people enter the market.
The storm clouds seem to be parting in the crypto network so that the market could turn bullish anytime soon.