Ever wondered why there are 2 animal references used to depict the market’s condition?
Whether you’re a novice or crypto expert, chances are you’ve heard about bull and bear markets. What differentiates them, and how do these mindsets impact people’s attitudes? So let’s dive into Bull vs Bear market: A Beginner’s Guide”
Bull Market: symbolically charges ahead with confidence
Bull markets are defined by the market going up aggressively over a period of time. It is considered a time of economic growth and rise in consumer confidence. As markets start to rise investor sentiment is confident, further encouraging them to buy into the market. Typically, bull markets are a rise in economic conditions of 20% over a 2-month period.
Bear Market: symbolically retreats down into hibernation
Bear Markets represent an economic downturn and declining asset prices. During this time, investors may want to protect themselves by pulling out of the stock market, driving prices down further. This, clubbed with reduced consumer spending, leads to an economic pessimism and overall negative sentiment. During this period, market conditions will usually fall over 20% for a longer period.
The key differences between bear and bull markets?
What to do in a bull and bear market?
How you respond to bull and bear markets depends mainly on your time horizon. if you’re a long-term investor, the ups and downs of markets iron themselves out, and the volatility doesn’t have a big impact on your portfolio. But the ideal investment mantra is to buy low and sell high or buy and HODL.
In a bear market, however, the chance of losses is greater because prices are continually losing value and the end is often not in sight. During this cycle, it is recommended to adopts safer investments such as fixed deposits, government bonds, etc.
The Bottom line
Regardless of how the markets are doing, it’s important to stay focused on the long-term.
It’s only when you give in to emotion that Bull vs Bear market cause stress, anxiety and financial damage. If you get caught up in the euphoria of a roaring bull market and invest at its peak, the ensuing selloff could lead to possible losses. Similarly, if you get scared when there’s “blood in the streets” and panic sell, you won’t enjoy the gains of the subsequent bull market.
The best way to combat the ups and downs of the stock market, is to DYOR (Do your own research) and stay on-course with your long-term strategy, and to remind yourself that volatility is part and parcel of being in the crypto game.