Two faces of the crypto market: understanding the rise and fall

To succeed in the world of cryptocurrency investment, it is essential to have a clear understanding of the two main phases of the market. These phases not only involve price fluctuations but also determine investor sentiment, market dynamics, and potential profit opportunities. Today, we will learn why understanding these market stages is fundamental to your investment strategy.

Duration of Bullish Phase: When the Market is Filled with Optimism?

When the prices of Bitcoin and other digital assets rise sustainably, we enter a market where investors are optimistic and active. During this phase, a continuous influx of new buyers, increasing business activity, and positive news effects are noticeable. In Bengali, bullish meaning is an optimistic and upward-looking market outlook indicating long-term price growth.

Clear signs observed in this phase include:

A 20% or higher upward trend in cryptocurrency prices. This trend remains stable for several weeks or months.

Interest in investing in digital assets significantly increases. New investors enter the market, and existing investors increase their participation.

Advancements in blockchain projects, investment decisions by large institutions, and regulatory approvals are frequently announced during this phase.

Trading volume on exchanges increases substantially, indicating strong market participation.

Bitcoin’s journey from 2020 to 2021 is a concrete example. During this period, Bitcoin’s price rose from $10,000 to $69,000, marking one of the most powerful bullish phases in crypto history.

Duration of Bearish Phase: When Do Investors Get Fearful?

In adverse market phases, investors face growing doubts and fear. During this time, the value of digital assets declines long-term, and widespread pessimism prevails. Investors tend to sell their holdings, thinking it’s the right time to avoid further losses.

Features of this crisis phase include:

Assets lose 20% or more from their peak levels. This decline can happen quickly or gradually but remains persistent.

Fear-driven selling begins. Investors try to sell their held cryptocurrencies at the lowest possible prices.

Trading activity on exchanges drops significantly. Sellers outnumber buyers, and liquidity dries up.

Negative news flow increases. Regulatory restrictions, security breaches, economic instability, or market fluctuations seem inevitable during this period.

The market crash of 2018 is a perennial example. That year, Bitcoin’s price continuously declined from $20,000 to $3,000, exemplifying a severe market crisis.

Bull and Bear Markets: Main Differences

Profitable Strategies in Each Market Phase

Take advantage of the bullish market

During the price increase phase, investors buy cryptocurrencies expecting long-term asset growth. This is the most suitable time for long-term investment.

Apply the HODL strategy (—)hold long-term###—ignoring short-term price fluctuations. Proven that those following this method receive significant returns over the long run.

Engage in trend trading—buy at local lows and sell at local highs. This method offers opportunities for short-term gains.

Manage risk in a declining market

Use shorting strategies—sell at higher prices now, buy back at lower prices later. This approach allows profit even in falling markets.

Convert your assets into stablecoins. It preserves your capital and prepares you for the next growth phase.

Diversify investments across different assets. It reduces risk and protects against losses in any single asset.

Identifying Market Stage Changes

Timing market shifts accurately is challenging, but some key signals can be monitored.

Indications of the start of a bullish market:

A significant recovery in prices after a long decline begins. Historical resistance levels are broken on technical charts.

Public interest in cryptocurrencies reawakens, and trading volume increases.

Major corporations, banks, or government agencies adopt digital assets.

Positive project announcements, technical upgrades, or regulatory recognition occur.

Indications of the start of a bearish market:

After a prolonged rise, sudden and sometimes unexpected price drops happen.

Fear causes a selling wave, and trading volume decreases.

Regulatory bodies impose strict rules or issue negative statements.

Economic instability, systemic issues, or market fraud become widespread.

Common Questions and Answers

How long do these market phases usually last?

Bullish markets typically last 1 to 3 years. Bearish markets can last from a few months up to 1.5 to 2 years. However, these durations are based on historical trends, and each cycle can differ.

Is it possible to profit in a declining market?

Yes, through shorting, investing in stablecoins, and diversifying across assets, profitable results can be achieved even in falling markets.

How to identify market stage changes?

Changes can be identified through technical analysis, monitoring trading volume, checking news trends, and following the activities of major institutions.

Final Thoughts

Understanding these two main market phases is crucial for success in cryptocurrency investing. The bullish phase offers growth opportunities, while the bearish phase demands protection and strategic planning. Through market analysis, risk management, diversification, and a long-term perspective, you can succeed in any market condition.