Bull Market Corrections in Crypto Markets | Bitbuy Canada

What Does Bull Market Correction Mean, and How Does It Apply to Crypto?

If you have paid any attention to the stock market, you have undoubtedly heard the terms bull and bear. The terms are all about the upward or downward trajectory of the market and capture how investors are feeling.

Though we associate them with the stock market, they also apply to cryptocurrencies. The highly volatile crypto market has seen its share of bullish and bearish times. We will dig a little deeper into the terms and how they relate to crypto and the blockchain.

What is a Bull Market?

A bull market makes investors happy. It is a market or investment that is moving in an upward trajectory. It is signals sustained or substantial growth, usually over 20%. It’s believed to be called a bull market because bulls attack in an upward motion.

The flip side of the crypto coin is a bear market. That is a market that is in the midst of a sustained decline.

Over the years, the terms have become associated with the stock market, but these terms apply to cryptocurrencies, real estate, and many other assets.

The terms “bull market” and “bear market” are not used in a micro sense. They represent a lasting, sustained change. It has to be a trend.

A bull run in crypto markets is slightly different from a stock market. Crypto markets are smaller and more volatile. It isn’t unusual to see a 40% increase in price in just one or two days, a very bullish scenario. The ups and downs can come quicker, but you have to zoom out to see how the market trends over time.

What Are the Characteristics of a Bull Market?

In a bull market, demand outweighs supply. Investors want into the market or want a specific asset. Look at the rise of Bitcoin in 2017. It went on a bull run. Bitcoin began the year at about $1,000 and closed out at the end of December at $19,000.

This rising trend creates a bit of a feedback loop. Investors believe that the process will continue to rise over time and want in, creating more demand on an asset short on supply. These investors are known as bulls. Rising prices bring on more investors, feeling like more growth is on the horizon, and prices soar.

Mainstream investors are still in the early adoption phase of cryptocurrency. The price of crypto is heavily influenced by public confidence in the technology. Investors measure the market sentiment, the potential optimism in the investment as a strategy to determine if they should invest.

What Causes a Bull Market to End?

If you picture a bull market on a line graph, it is never a smooth upward line. There are always fluctuations, but overall, the price is rising. A dip does not mean that the bull market is over. It is essential to gauge the trends from a broader perspective.

If we look at Bitcoin, selling at the end of 2017 at $19,000 USD may have looked good, but that was not the peak of that bull market. That peak came in November 2021 when Bitcoin reached an all-time high of $68,000 USD.

But, throughout that rise, there were dips. A tweet from Elon Musk implying that he was breaking up with Bitcoin sent prices plunging.

Bull markets don’t last forever. Eventually, confidence will decline. Bad news, an economic downturn, policy issues, and, yes, unfavourable tweets can all shake confidence and send prices down. Prices fall as people look to offload what they believe to be no longer valuable.

What is a Bull Market Correction?

Bull market corrections are a regular part of investing. A correction is generally agreed to be a 10% to 20% drop in value from a recent peak.

Because they are common in investing, you need to be comfortable with corrections. They can last a few weeks or a few months, but a recovery usually follows them.

Diversification and a balanced portfolio are the best ways to combat dips. Having too many eggs in one crypto basket can be a risky proposition.

Are Bear Markets Bad?

A bear market means a downward trajectory, so it would not be ideal if you held a significant stake in a falling investment. But have you ever heard the terms buying in the dip? Think of it as the glass-half-full approach to a bear market.

Buying in the dip means that the prices may be dropping, but you have faith that it will rebound. You buy while it is low, hoping that the market will correct itself. It is what happened after Elon Musk’s Bitcoin breakup tweet. There was a bear market, but eventually, Bitcoin rose (to record highs, as a matter of fact).

Like any investment, selling in a bear market is all about your personal risk comfort level. Again, diversification can protect you from one asset that investors are bearish on.

Should I Buy, Sell, or HODL?

If you are diving into the crypto world and are researching blockchain technology, you have probably seen the hashtag #HODL. Well, the term has some bearing on bull and bear markets.

HODL is a call to hold on. Don’t buy, don’t sell. It is used often in the crypto world because of the volatility of the crypto market. The term itself comes from a typo in a Bitcoin blog from 2013.

Holding (or hodling) is a strategic move as a long-term play. You trust that there will be a steady rise over the long term. Due to the more frequent ups and downs, holding comes up a little more in the crypto world.

Feeling Bullish? Start Buying Crypto Now!

Now that you’re familiar with the differences between bear and bull markets, you can start investing in crypto. Signing up with Bitbuy allows you to buy and sell crypto on Canada’s most secure and trusted platform.