What is a Bull or Bear Market?

The crypto market has a specific set of rules and cycles that investors should be aware of. Like traditional financial markets, crypto has periods of expansion and contraction that can impact overall strategies and outcomes. These cycles, known as “bull” and “bear” markets, are the heartbeat of crypto’s volatility and opportunity.

Understanding these phases can mean the difference between profits and losses. Unlike traditional markets with decades of historical data and established patterns, crypto markets are relatively young but have already demonstrated intense cycles. 

By recognizing the characteristics, causes, and optimal strategies for the bull and bear market phase, you can position yourself to capitalize on opportunities while protecting your portfolio during downturns.

What Is a Bull Market in Crypto?

A bull market is a period of sustained upward price movement, typically defined by a 20% rise in prices following a previous decline. During these phases, the overall crypto market experiences optimism, increasing valuations, and growing adoption.

The term “bull” originates from how a bull attacks by thrusting its horns upward, and it is seen as a symbol of the upward trajectory of market prices. In crypto, bull markets can be particularly intense, with major coins like Bitcoin often seeing price increases of 1,000% or more over relatively short time frames.

Characteristics of a Bull Market

The most obvious characteristic of a crypto bull market is consistently rising prices across the major coins. During these periods, investors become increasingly confident, with a strong belief that the upward trend will continue. This optimism creates a self-reinforcing cycle where positive sentiment drives further price increases.

In bull markets, you’ll notice the following:

• Price charts show clear upward trends with higher highs and higher lows
• Growing social media buzz and positive coverage in mainstream financial media
• An increasing number of success stories from crypto investors
• Expanding interest from friends, family, and colleagues who previously were not really interested in crypto
• Rising prices that outpace traditional investment vehicles like stocks or real estate

The psychological impact of a bull market shouldn’t be underestimated—as prices rise, fear of missing out (FOMO) drives new investors into the market, which accelerates price movements.

High Trading Volume and Liquidity

Increased trading activity is one of the characteristics of the bull market. Daily trading volumes expand as more investors enter the market and existing investors increase their positions. All of this brings several benefits:

• Easier execution of large orders without too much price slippage
• Tighter bid-ask spreads on exchanges
• Reduced transaction costs due to competitive fee structures
• Increased options for trading pairs and investment vehicles
• Faster clearing times for trades

Higher liquidity also tends to reduce extreme price volatility on a day-to-day basis, creating a smoother upward trend rather than erratic movements, though significant volatility still exists compared to traditional markets.

Increased Adoption, Media Hype, and Institutional Investment

During bull markets, crypto adoption accelerates significantly across multiple fronts:

Media Coverage: Mainstream financial and technological media cover cryptocurrency more and frame it positively. Success stories are all over the news, and crypto experts gain prominent platforms.

Institutional Investment: Traditional financial institutions that previously avoided crypto begin developing investment products, custody solutions, and trading desks. Corporate treasury departments start allocating portions of their cash reserves to Bitcoin and other coins.

Retail Adoption: User-friendly applications, exchanges, and wallet solutions gain too many new accounts. Payment processors and traditional banks expand crypto offerings to meet customer demand.

Technological Development: Funding for blockchain projects increases through venture capital, initial coin offerings (ICOs), and token sales. Developer activity on major cryptocurrency networks expands rapidly.

What Causes a Bull Market?

There is always a curiosity behind this optimism, and the question is, what is the reason behind this bull run? And these reasons can be several: 

Strong Bitcoin Performance

It is no surprise that Bitcoin sets the ground for all the crypto market sentiments. As the largest and the most successful crypto, several Bitcoin-specific factors can ignite a bull market.

The first factor is the halving event. Approximately every four years, Bitcoin’s programmed reduction in mining rewards reduces the new supply entering the market. These “halving” events have historically preceded major bull runs as the reduced supply meets increasing demand.

When major companies like Tesla or MicroStrategy add Bitcoin to their balance sheets, it signals increasing mainstream acceptance and often sparks bullish sentiment.

Another factor is technical upgrades. Major protocol improvements like SegWit, Lightning Network, or Taproot can renew confidence in Bitcoin’s long-term viability and scalability.

Also, during periods of inflation, currency devaluation, or geopolitical instability, Bitcoin’s fixed supply and decentralized nature become particularly attractive as a hedge against traditional financial systems.

When Bitcoin establishes a strong uptrend, altcoins usually follow with even larger percentage gains, creating a market-wide bull run.

Favorable Regulations and Institutional Adoption

Another aspect is regulatory clarity because it plays a critical role in bull markets, especially for institutional participants who require compliance certainty:

• Clear guidelines from authorities about crypto classification, taxation, and investor protections clarify things for market participants.
• The approval of cryptocurrency exchange-traded funds (ETFs) and similar investment vehicles enables broader access to crypto exposure.
• Major companies accepting cryptocurrency as payment, investing in blockchain projects, or developing their own crypto initiatives is a significant validation of the market.

Growth in DeFi, NFTs, and Emerging Crypto Trends

Innovation can also fuel the bull market. Let’s first mention DeFi apps, which let people lend, borrow, and trade crypto without banks or middlemen. This creates more uses for currencies beyond buying and holding them, driving up demand and value. 

NFTs, digital collectibles, art, gaming items, and other unique blockchain assets create new markets and bring previously uninterested demographics into the crypto space.

As internet applications increasingly use decentralized components, and participate in token-based economies, and user ownership, the utility of cryptocurrencies grows, fueling bull runs. 

Examples of Bull Markets in Crypto

To clearly understand the concept, let’s take a look at the practical examples of recent bull runs:

The 2017 ICO Boom

The 2017 bull market was cryptocurrency’s first major mainstream breakthrough. Here are the key highlights from the moment:

• Bitcoin rose from approximately $1,000 in January 2017 to nearly $20,000 by December 2017.
• Ethereum increased from around $10 to over $1,400, fueled by its smart contract platform enabling the ICO revolution.
• Total cryptocurrency market capitalization grew from $18 billion to over $800 billion.
• Initial Coin Offerings (ICOs) raised over $5 billion, funding thousands of new blockchain projects.
• Retail investors flooded into the market, with Coinbase adding over 100,000 accounts in a single day during peak periods.

The market eventually peaked in January 2018 before entering a prolonged bear market.

The 2020-2021 Institutional and DeFi Bull Run

Following the March 2020 COVID-related market crash, cryptocurrency entered an extraordinary bull market driven by institutional adoption and DeFi innovation:

• Bitcoin surged from around $5,000 in March 2020 to a peak of nearly $69,000 in November 2021.
• Ethereum increased from $100 to over $4,800, driven by DeFi applications and later NFT mania.
• Total crypto market capitalization exceeded $3 trillion at its peak.
• DeFi protocols locked in over $100 billion in value at the height of the cycle.
• Companies like Tesla, Square, and MicroStrategy added Bitcoin to their balance sheets.
• The first Bitcoin ETFs gained regulatory approval in some jurisdictions.
• Venture capital investment in crypto startups reached levels never seen before.

The 2024-2025 Bitcoin ETF and Political Bull Run

I promised to Make America Great Again, this time with crypto. @WorldLibertyFi is planning to help make America the crypto capital of the world! The whitelist for eligible persons is officially open – this is your chance to be part of this historic moment. Join:…

— Donald J. Trump (@realDonaldTrump) September 30, 2024

Recently, the market experienced another bull run, during which Bitcoin reached its record high of exceeding $109,000. Below are the major points of this run.

• Bitcoin surged past $60,000 in early 2024, driven by the approval of U.S.-listed Bitcoin ETFs and anticipation of the halving event.
• Political developments contributed significantly to market sentiment, with Trump’s re-election, who maintained the pro-crypto stance.
• Elon Musk’s appointment as Head of DOGE (Department of Government Efficiency) and Trump’s positive remarks at Bitcoin Nashville 2024 further boosted investor confidence.
• The integration of crypto with AI created additional investment narratives.

This is an example of how regulations, political support, and technological perspectives shape and drive market sentiment.

What Is a Bear Market in Crypto?

A bear market is a period of declining prices, typically characterized by a drop of 20% or more from recent highs. These contractionary phases often follow bull market peaks and can last for months or even years.

It is believed that the term “bear” derives from how a bear attacks by swiping its paws downward, symbolizing the downward trajectory of prices. When it comes to crypto, bear markets can be particularly severe, with major assets often losing 80-90% of their value from their all-time highs.

Characteristics of a Bear Market

In this section, we will discuss the specifics of the bear run:

Prolonged Price Declines

The defining feature of a crypto bear market is a consistent downward trend in prices across the market. This is what you are likely to notice during these times:

• Major cryptocurrencies establish a series of lower highs and lower lows on price charts.
• Brief rallies (often called “dead cat bounces”) fail to sustain momentum and ultimately lead to lower prices.
• The total crypto market cap shrinks significantly.
• Technical indicators consistently show oversold conditions that fail to produce lasting recoveries.

Decreased Trading Volume and Investor Pessimism

When a bear market hits, trading activity slows down as traders flee the market. You’ll notice that exchanges become quieter, with fewer trades happening and bigger price gaps between buyers and sellers. 

Projects struggle to raise money, while crypto events that were once packed now have empty seats. The media always follows the trends, and they start sharing stories of exposing failures and scams rather than success stories about crypto like they usually do during bull runs. 

Even social media chatter about crypto becomes less frequent and much more negative. The mood turns gloomy as investors start doubting if blockchain and crypto have any real future. People who buy at high prices face both financial losses and emotional struggles, often wondering if they’ve made a terrible mistake.

Increased Regulatory Concerns and Negative News

Bear markets usually coincide with heightened regulations and negative news cycles. You are most likely to read about:

• Regulatory bodies announce investigations, enforcement actions, or restrictive policies.
• Security breaches, scams, and project failures receive amplified attention.
• Mainstream financial figures often critique cryptocurrency’s value proposition.
• Project teams announce layoffs, reduced development timelines, or complete shutdowns.
• Tax authorities clarify the often-unfavorable treatment of cryptocurrency transactions.

These negative developments create a feedback loop where declining prices lead to negative news coverage, which obviously affects prices. 

What Causes a Bear Market?

Now, it’s time to understand the logic behind this declining market. In this section, we try to understand the reasons for price drops.

Bitcoin Halving Cycles and Market Corrections

Crypto markets show cyclical behavior influenced by Bitcoin’s emission schedule. Following the euphoria of bull markets that typically occur after Bitcoin halving events, the market eventually becomes overextended. When buying momentum exhausts itself, prices begin to correct.

Many trading tools show that the market is overheated after prolonged uptrends. If prices drop below certain important levels, automatic trading systems kick in and cause even faster selling.

Additionally, during bull markets, traders increasingly use borrowed funds to maximize returns. When prices begin declining, forced liquidations of these leveraged positions create cascading sell pressure.

As prices reach new all-time highs, early investors often begin selling portions of their holdings to realize gains, creating natural selling pressure.

In other words, Bitcoin’s price typically follows predictable cycles based on its halving events. First, prices rise after a halving, and then they get too high as everyone gets excited and borrows money to buy more. When early investors start selling to lock in profits and prices dip, automatic trading systems and forced sales from borrowed positions trigger even more selling, causing prices to crash until the next cycle begins.

Regulatory Crackdowns

Governments and regulations frequently catalyze or worsen bear markets. Here are several examples:

China’s Recurring Bans: China has repeatedly implemented restrictions on cryptocurrency trading, mining, and financial institution involvement, most notably in 2017-2018 and again in 2021.

SEC Enforcement: The U.S. Securities and Exchange Commission’s determinations about which cryptocurrencies constitute securities and subsequent enforcement actions have caused major market corrections.

International Coordination: When multiple jurisdictions simultaneously implement restrictive policies or unfavorable tax treatment, global trading volume and investor confidence can decline rapidly.

Banking Restrictions: When traditional financial institutions restrict cryptocurrency businesses from accessing banking services, market functionality can be severely damaged.

Macroeconomic Factors

The broader economy now affects crypto much more than before. When central banks raise interest rates, investors often pull money from crypto to put in safer options that now pay decent returns. 

Though Bitcoin is supposed to protect against inflation, when it rises, central banks typically raise rates, which ultimately hurts crypto prices. During recessions, people generally avoid risky investments like crypto, preferring cash and safer options instead. 

Also, when the US dollar gets stronger, crypto prices usually fall. As big financial institutions have entered crypto, these connections to traditional markets have gotten stronger, making crypto behave more like other risky investments during tough economics.

Examples of Bear Markets in Crypto

There have been several bear runs in recent years, and below, we break down some of them:

The 2018-2019 Crypto Winter

Following the bull market of 2017, cryptocurrency entered a prolonged bear market with some worrying consequences:

• Bitcoin fell from approximately $20,000 in December 2017 to a low of around $3,200 in December 2018, an 84% decline.
• Ethereum dropped from over $1,400 to below $90, a 94% reduction.
• The total cryptocurrency market cap fell from over $800 billion to approximately $100 billion.
• Over 80% of ICO projects failed or effectively abandoned development.
• The media narrative shifted from revolutionary technology to a failed experiment.
• Thousands of jobs were eliminated across cryptocurrency companies.

The 2022-2023 Bear Market

After reaching all-time highs in November 2021, cryptocurrency entered another significant bear market:

• Bitcoin declined from nearly $69,000 to a low of approximately $15,500, a 77% drop.
• Ethereum fell from $4,800 to around $900, an 81% reduction.
• Multiple high-profile project failures occurred, including Terra/Luna, Three Arrows Capital, and FTX.
• Several cryptocurrency lenders, like Celsius and Voyager, filed for bankruptcy.
• Regulatory enforcement increased significantly, particularly from the SEC.
• The total crypto market cap declined from over $3 trillion to under $800 billion.

This bear market was notable for the failure of previously trusted centralized institutions rather than the technology itself. 

Bull vs. Bear Markets in Cryptocurrency

How to Navigate a Bull Market

It is very clear that bull markets are opportunities to gain profits but also carry serious risks, particularly for inexperienced investors who are caught up in the euphoria created by the market and media. Here are some of the approaches to maximize benefits while protecting your capital.

When prices are rising, you’ll need to decide between holding long-term or trading short-term. Long-term holding (or “HODLing”) means buying quality cryptocurrencies and keeping them through price swings, which reduces fees and potential tax events. Short-term trading tries to capitalize on volatility but requires more time, knowledge, and risk management from you.

Taking profits is one of the trickiest parts of bull markets. You might sell a percentage of your holdings when prices hit specific targets, use technical indicators to identify potential resistance levels, or compare current valuations to fundamental metrics. Remember that no one perfectly times the top, so consider scaling out gradually rather than trying to sell everything at once.

Always think about and watch out for FOMO (fear of missing out), which can push you to buy at peak prices or invest in questionable projects just because they’re rising. You can handle this by setting clear investment criteria before prices start climbing and implementing systematic buying strategies like dollar-cost averaging.

Overleveraging, which means borrowing money to amplify returns, can be dangerous. While leverage increases potential profits, it also magnifies losses and can lead to forced liquidations during even small corrections. Generally, you should always set clear leverage limits and never risk money you can’t afford to lose.

As the bull market matures, watch for warning signs of a potential top. These include extreme greed in sentiment indicators, mainstream media obsession with crypto prices, previously skeptical figures suddenly promoting cryptocurrency, and projects with minimal products achieving massive valuations. Remember that you can’t perfectly time the market turns, but these signals can help you become more cautious with your investments.

How to Navigate a Bear Market

Bear markets test even experienced investors but can be an opportunity for wealth-building if you’re prepared. Diversification becomes crucial during downturns—spread your investments across different cryptocurrency sectors and consider keeping some in high-quality stablecoins. These stablecoins provide both protection and ready capital for buying opportunities when prices drop further.

We mentioned dollar-cost averaging (DCA), and it works particularly well in bear markets. By investing fixed amounts regularly, regardless of price, you’ll automatically buy more coins when prices are lower. Because of this, you won’t be pressured to time the exact bottom, and it helps manage the psychological stress of watching prices fall.

Bear markets are ideal for exploring yield-generating strategies. Staking lets you earn rewards by participating in blockchain security, typically offering 3-15% annual returns. Lending your cryptocurrency (especially stablecoins) on reputable platforms can generate income while you wait for market recovery. Just be sure to research platform security and use overcollateralized lending when possible.

Learning how to recognize potential market bottoms can help you optimize your investments. Watch for extended periods of decreasing volatility, higher lows forming on longer timeframes, extreme fear in sentiment indicators, and continued development despite price declines. The “accumulation phase” typically shows sideways price action with declining exchange balances as coins move to private wallets.

Above all, disciplined risk management matters most in bear markets. Never invest more than you can afford to lose completely, scale position sizes based on project risk profiles, and maintain sufficient cash reserves. Pay special attention to security by moving long-term holdings to hardware wallets and implementing strong authentication for exchange accounts. Remember that bear markets test your financial resilience as well as your psychological endurance.

Conclusion

Both bull and bear markets present challenges and opportunities that require different strategies and mindsets from you. 

Bull markets offer tremendous profit potential but also test investors’ discipline and emotional control. The euphoria of rapidly rising prices can lead to overconfidence, excessive risk-taking, and failure to secure profits.  

Bear markets, while psychologically challenging, often create the foundation for generational wealth creation. Those who use downturns to accumulate quality assets at discounted prices, continue learning and developing skills, and maintain long-term conviction are typically rewarded when the cycle eventually turns. 

Perhaps most importantly, successful crypto investors understand that neither market condition lasts forever. The cyclical nature of markets demands adaptability, patience, and a commitment to ongoing education. You can build up your confidence by developing strategies appropriate for different market phases and maintaining realistic expectations.

Frequently Asked Questions (FAQ)

References

1. Exchange Traded Funds – Investor.gov
2. Bull Market – Investopedia
3. ICO Boom – Forbes
4. Coinbase adding over 100,000 users – CNBC
5. Covid-related market crash – Sciencedirect
6. Bear Market – Corporate Finance Institute