Being Bullish or Bearish – What does it actually mean?

By July 14, 20225 minute read
Being Bullish or Bearish - What does it actually mean?
Note: This blog is written by an external blogger. The views and opinions expressed within this post belong solely to the author.

Bull and bear markets are frequently used to characterize the condition of the market, regardless of whether it’s the stock market or the cryptocurrency markets. Generally speaking, a bull market is one in which prices rise, while a bear market is one in which prices fall.

Bullishness is the belief that an asset or asset class, or even a project, is going to grow in value. Bearish, on the other hand, refers to low expectations for a certain financial asset. Bullish people are referred to as “bull” or “bulls” if a group or faction of the market is bullish. Therefore, “bears” expect asset values to decrease.

Why use bulls and bears as metaphors? The explanation may lay in the way both animals hunt. Bulls attack by forcing their horns up through their target. On the other hand, bears attack from the top down with their weight and arms.

According to Investopedia, this interpretation of the terminology’s origins is only one possibility. “The origins of these expressions are unclear.” The phrasing may also emerge from bearskin transactions ages ago.

Bullish is defined in the Oxford Learner’s Dictionary as “feeling confident and positive about the future” or “causing, or connected with, an increase in the price of shares.”. Conversely, bearish indicates “showing or expecting a fall in share prices.”

So, what is a bull market?

A bull market, or bull run, is described as a period of time in which the majority of investors are buying, demand surpasses supply, market confidence is high, and prices are rising. Any market that sees prices rapidly rise might be the beginning of a bull market.

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Bulls are investors that believe prices will rise over time. An increase in investor confidence creates a positive feedback loop that attracts further investment, resulting in an increase in pricing.

Because public confidence in a particular cryptocurrency has a significant impact on its price, some investors employ an approach known as “market sentiment” to gauge investor optimism in a certain market.

When does a bull market come to an end?

Even in a bull market, there will be ups and downs and corrections. It is possible to misread short-term declines as the end of a long-term uptrend. Because of this, it’s crucial to look at any possible signals of a trend reversal from a longer-term viewpoint, looking at price activity over longer periods of time. The term “buying the dip” is commonly used by investors with a shorter time horizon.

Bull markets don’t persist forever, and investor confidence will begin to collapse at some time – this might be sparked by anything from negative news like unfavorable legislation to unanticipated circumstances like the COVID-19 pandemic. A bear market can begin with a dramatic decline in prices, which leads to a downward cycle as more investors sell to protect themselves from future losses.

What is a bear market?

The term “bear market” refers to a period of time in which supply outweighs demand and prices decline. Investors who believe that prices will continue to decline are known as “bears.” Trading in bear markets may be challenging, especially for those without much prior expertise.

It’s impossible to forecast the end of a bear market or the lowest price since recovery is generally delayed and unpredictable, impacted by external variables like economic growth, investor psychology, and international events.

However, they may also be a game-changer. Buying in a down market may pay off in the long run if your investment strategy is long-term in nature. Short-term investors should also be on the watch for price increases or decreases that are just transitory. Then there’s short selling, which is a technique to gamble that an asset’s value is going to fall in the future. Dollar-cost averaging is another popular crypto investment strategy that involves investing a certain amount (say $50) every week or month, regardless of the asset’s performance. This allows you to invest in both bull and bear markets, distributing your risk.

Purposefully Bearish

A variety of factors influence investors’ bullish and bearish inclinations. As long as a market or asset can be traded in both directions, traders tend to care less about the direction of the market or asset (called going long and short). Investors, on the other hand, generally hold positions for longer periods of time.

A trader may be more concerned with whether they are correct in their bullish or bearish evaluation rather than hoping for bullishness or bearishness and profiting on trades as long as they are accurate in assessing the direction of a particular asset, depending on the trading tactics employed. However, some traders may have a preference for one market scenario over another.

On the other hand, investors acquire and maintain positions for extended periods of time, earning from the price growth; therefore, they logically favor positive markets. If an investor is bearish on an asset, he or she may take a long-term short position or sell it, but the most anybody can gain (in almost every situation) is a 100% profit if they short it at its absolute top and ride it to zero. But assets have practically limitless potential for price appreciation, making higher gains realistically attainable in certain circumstances.

Why would an investor or trader want Bitcoin (BTC) or any other cryptocurrency to fall in value, even if they are bullish on the crypto sector as a whole? Possibly their position. In the event that a trader is bearish about BTC’s future price movements, they may establish a short position on the asset and, as a result, want the price of BTC to drop.

There are traders who are long-term bullish, as well as those who are short-term bearish. For example, they may anticipate that Bitcoin’s price would backtrack for a few days or weeks but then rebound and resume its upward, multi-month trend.

Additionally, short-term investors and traders may want lower prices in order to acquire particular assets at a lower price in the near future. On the other hand, a trader may have a bullish short-term outlook but a bearish long-term outlook. Short-term speculation can lead them to buy or go long, but they expect to eventually sell their holdings because they feel the market is a bubble or something of that sort.

The definition of short-term and long-term in the financial markets can be subjective, so it’s crucial to keep this in mind.

Closing Thoughts

A person’s bullish or bearish outlook is typically influenced by several factors, including charts, news, and general knowledge. A trader may believe Bitcoin or an altcoin is bearish based on specific chart parameters.

They may also be pessimistic about assets after unfavorable developments, such as a specific government regulatory action. On the contrary, one could be bullish for a while due to an approaching event that might be a big deal for the asset that the individual has invested in, for instance, the Bitcoin halving.

Thus, numerous things influence bullishness and bearishness. Timeframes, views, opinions, and events may all influence an asset or asset class’ outlook. Ultimately, each person must decide for themselves what they perceive.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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Rony Roy

Rony Roy

Rony Roy is an electrical engineer who turned tech author in the Cryptocurrency space. He got block-chained in 2012 and fell in love with tech and its use-cases and has been writing his way through problems since 2016.

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