Cryptocurrency traders and speculators always hope to be part of a bull market. A market trend during which prices can go up by a significant margin is the best time to make good money. However, no market can remain subject to a bull market for an extended period without corrections.
Table of contents
The Bull Market Concept
All financial markets go through market trends and cycles regularly. Three different types of trends exist: a bull market, a bear market, and sideways trading. All of these cycles will occur again and again, yet their duration may differ significantly. One trend can last much longer than the other or happen sooner than traders initially expect. Everyone hopes to see more bull market action than bearish conditions or sideways trading.
During a bull market, an asset’s price is rising steadily and beyond its current value. It is not uncommon to see an investment double or triple in value during a solid bull run. Every bull market trend is likely to be met with a price correction. Financial markets cannot sustain indefinite upward momentum. Volatility will always ensue during and after a bull run.
One benefit of a bull market is how it leads to more straightforward trading strategies. Both experienced, and novice traders can dow ell during this cycle, but only if they learn to time their trades correctly. A bull run can quickly turn into a bear market after a specific price point. Preparing for that trend reversal requires thorough technical and market analysis.
Beware Of The Pitfalls
It is challenging not to get euphoric when a bull market occurs. Traders will often suffer from FOMO when prices continue to skyrocket, leading to terrible trading decisions. Suffering from FOMO is not unique to cryptocurrencies either, as bull trends can impact Forex, bonds, commodities, real estate, and other markets as well. Making the most of these moments is crucial, but getting greedy is something to watch out for.
Another pitfall to watch out for is by going all-in on the asset subjected to a bull market. Diversifying one’s investment portfolio will always result in better overall success. Taking a small profit on a well-performing asset is still better than going all-in and losing a lot of money by incorrectly timing the trend reversal.
Perhaps the biggest tip is to keep in mind bull markets will introduce market volatility. Even if the overall trend is bullish, there will be price dips and temporary reversals. Fluctuations are a natural side effect for markets heading in an upward or downward direction. Looking at the more significant, long-term picture is crucial before making any financial commitments.
Is Bitcoin A Bull Market?
Looking back at Bitcoin’s market performance since its inception, one can argue this is a bull market. Despite some minor setbacks along the way, the leading cryptocurrency remains bullish. More importantly, it keeps yielding strong yearly returns on investment.
That said, there have been extensive bearish periods too. Between January 2018 and the mid=point of 2018, the Bitcoin price struggled to reach a five-digit value. That period is a bear market, yet it has not broken the overall uptrend when zooming out further on the chart. Analyzing market momentum can be more complicated than it seems at first.
From a long-term view, Bitcoin can certainly be a bull market and remain in that phase. As the cryptocurrency matures further, the market setbacks appear to leave less of a lasting impression. How long this momentum can continue is anyone’s guess at this stage. There may be a time when Bitcoin becomes a bear market (again), but there is no official indication for now.
Taking Advantage Of A Bull Market
Any cryptocurrency trader will try to take advantage of a bull market to make some money. When prices are going up continuously, it is a matter of placing a buy order and selling higher. Buying more of an asset during [brief] dips helps to dollar-cost average down one’s investment, providing a powerful long-term investment strategy.
Rather than following the trend, one can also take the opposite approach. Every bull market will see dips along the way. Opening a short market position after a strong bullish move can be a smart strategy too. Exploring this option may require advanced market knowledge to pull off successfully, though.
Experiencing a bull market first-hand is exciting but also contains a few pitfalls to be wary of. Traders can make money in various ways during such a trend, assuming one has a clear head and a viable trading strategy. Chasing the top is ill-advised, even if the market participants remain bullish.
Managing risk during a bull market needs to be a top priority. Overlooking this aspect can wreak havoc on one’s investments and portfolio. Whether you are a beginner or an experienced trader, the same rules apply to everyone.