Is it a bull run or a Bear Market? How to distinguish between the two?

Source: Cointelegraph Original Text: "Is it a Bull Market or a Bear Market? How to Distinguish Between the Two"

Not sure if you're in a bull market or a bear market? This guide explains how to distinguish between the two through price trends, trading volume, market sentiment, and on-chain data. Learn how to identify market cycles, what signals to pay attention to, and how to adjust your strategy for each phase to make your trading smarter.

The cryptocurrency market is like an emotional rollercoaster, with prices soaring in one month and plummeting the next. If you have ever been confused about whether you are in a bull market or a bear market, rest assured, you are not alone.

In short:

A bull market refers to a period when prices continually rise, investor sentiment is high, and the market is generally filled with an atmosphere of optimism. Looking back from the end of 2020 to the beginning of 2021; Bitcoin (BTC) skyrocketed from around $10,000 to nearly $70,000. New projects emerged like mushrooms after rain, as if everyone from your cousin to Uber drivers was investing in cryptocurrency.

In contrast, a bear market is a period when prices continuously decline, investors withdraw their funds, and market sentiment sharply deteriorates. A typical case? 2022. After reaching an all-time high, the market took a sudden downturn. Bitcoin fell below $20,000, and projects collapsed one after another (remember Terra?). Even seasoned traders began to discuss the topic of "building in a bear market."

Understanding the current market conditions helps you make more informed decisions, which is its importance. You wouldn't want to blindly invest in meme coins during a downtrend, nor would you want to panic sell before the market is about to rebound.

Identifying market cycles can help you invest more strategically, manage risks effectively, and most importantly, maintain emotional stability. In the cryptocurrency space, emotional control accounts for half of success.

Did you know? The "bearskin traders" in 18th century England were early short sellers who sold bear skins they did not yet own, betting that prices would fall. The saying "never sell the bear skin before you catch the bear" subsequently became popular, serving as a metaphor as well. The term "bull" appeared later, not only as the opposite of "bear" but also named for the upward thrusting motion of a bull's horns when it charges.

Indeed, cryptocurrencies are superficially "numbers on a chart". But behind them lie stories, headlines, and the ever-changing sentiments of the entire community. Here are ways to understand bull and bear cycles:

a) Continuous price increase

It is inevitable that prices rise during a bull market. More critically, this rise is sustained and typically lasts for several weeks or months. You will observe that mainstream cryptocurrencies steadily climb, while altcoins also rise accordingly.

Textbook case? Bitcoin's surge from about $10,000 to $69,000 in 2020-2021. This round of growth was driven by strong momentum, institutional support (Tesla, Strategy, etc.), and significant retail fear of missing out (FOMO).

For example, the meme-driven surge of Dogecoin in early 2021, from a joke identity to a leap to $0.45, was thanks to Elon’s tweets and the enthusiastic support of the Reddit community.

b) Positive investor sentiment

When the X platform is filled with a joyful atmosphere, and various parties predict that BTC will "fly to the moon", new projects are emerging with sky-high valuations, you can sense that the market sentiment has turned bullish. Funds are accelerating into the market, and even high-risk investments are seen as obvious opportunities. This is a clear sign that positive investment sentiment is saturating the market.

c) favorable economic indicators

Bull markets are often accompanied by a low interest rate environment, easy access to credit, and overall tech-friendly economic conditions. For example, during the bull market in 2020, economic stimulus checks during the pandemic and low-cost borrowing provided retail and institutional investors with more ample capital to invest in digital assets.

a) long-term price decline

Bear markets usually last for a long time. Prices fall, then further decline, with each small rebound quickly swallowed by waves of selling. Looking back at the "crypto winter" of 2018, Bitcoin plummeted from $20,000 to around $3,000.

The brutal decline of 2022 saw BTC drop from $69,000 to below $20,000. That crash was not just about the price; it was fueled by a series of collapses such as the Terra-Luna, Celsius, and FTX scandals. The domino effect continued to spread.

The bear market atmosphere often makes people feel as if the feast has come to an end.

b) negative investor sentiment

During the bear market phase, fear dominates completely. News headlines become pessimistic, social media activity declines, and even staunch believers begin to question their investment philosophy. Funding channels shrink, development teams go silent, and the joke about "exit liquidity" starts to circulate in the community.

c) unfavorable economic environment

Macroeconomic headwinds are making matters worse. High interest rates, inflation concerns, or tightening monetary policy typically exacerbate market conditions. For example, in 2022, the Federal Reserve's aggressive interest rate hikes significantly diminished the appeal of risk assets, including cryptocurrencies.

Identifying key indicators of market phases Although no single indicator can provide 100% certainty, industry traders and analysts still rely on several time-tested important indicators. Besides the obvious price, let's analyze other indicators you can refer to.

Trading volume reveals the confidence behind price movements.

In a bull market, price increases are usually accompanied by strong trading volume support. More buyers enter the market, increasing market liquidity, which strongly supports the upward trend.

During a bear market, trading volume often decreases significantly. Price declines face weak buying pressure, and the market appears neglected.

Low trading volume combined with falling prices? If you are expecting a market rebound, this is certainly not a good signal.

Industry data: During the bull market in 2021, Dogecoin experienced explosive growth in trading volume, with a daily trading scale approaching $70 billion when its price climbed to $0.45.

An important tool relied upon by many investors is the Cryptocurrency Fear and Greed Index. This index evaluates investor sentiment as optimistic ( greedy ) or pessimistic ( fearful ) by monitoring factors such as social media activity, price volatility, and Google search trends.

Extreme greed usually occurs at the market top.

Extreme fear tends to appear near market bottoms but may persist for a long time during deep correction phases.

Pay attention to market trends daily, but do not let them completely dominate your investment strategy. Market sentiment indicators can only reflect the current state and are not accurate tools for predicting the future.

Even if you are not a technical analysis expert, you can identify some valuable market signals.

Moving Average: When the price consistently operates above the 200-day moving average, it is typically regarded as a bullish signal. Conversely, when the price falls below this average line, it often indicates that the market may reverse. Please note that these are long-term trend assessment tools and are not indicators designed for intraday trading.

Relative Strength Index ( RSI ): This indicator is specifically used to measure whether an asset is in an overbought or oversold condition: When the RSI reading exceeds 70, it indicates that the market may have become overheated and is at risk of a correction, while a reading below 30 may suggest that the asset has been severely oversold and has a high potential for a rebound.

These are not hard and fast rules, but they can help you feel the market dynamics.

Sometimes, the biggest market drivers do not appear on the charts.

Bullish signals may include:

Adoption by large institutions (such as BlackRock's application for a Bitcoin ETF).

Regulatory news or court victories friendly to cryptocurrency businesses.

Major technological milestones (e.g. Ethereum upgrades or layer two network launches).

At the same time, bearish signals are typically manifested as:

Regulatory crackdown (SEC targeting major exchanges).

High-profile security vulnerabilities or protocol failures.

Global instability - inflation, war, or financial contagion.

Once you understand the metrics you need to pay attention to, the next step is to determine where to get this information. Fortunately, there are a lot of free tools in the cryptocurrency space, as long as you know how to use them.

If you want to gain a deep understanding of price trends, reliable charting tools are essential.

TradingView is known for its highly customizable charts and rich technical indicators.

Cointelegraph provides a clear overview of price, market cap, and trading volume trends, which is particularly useful for tracking emerging or small-cap tokens.

Did you know? TradingView's charting tools have been directly integrated into several top global cryptocurrency exchanges, including Binance, Bybit, OKX, and Bitget.

The cryptocurrency market is more driven by sentiment than purely mathematical models.

Tools like LunarCrush are specifically designed to track social media activity, influencer dynamics, and trending tokens. If Dogecoin experiences a surge in popularity again, you are likely to catch wind of it first on these platforms.

Want to understand the movements of whale investors? Professional platforms like Glassnode and CryptoQuant can present key data such as wallet fund flows, miner activity, and exchange balances. These indicators act like the "electrocardiogram" of the blockchain, allowing investors to capture signals of fund migration before price changes.

Understanding market cycles is one thing, knowing how to act accordingly is another. Your investment strategy should be flexibly adjusted based on whether you are in a bull market soaring or a bear market surviving.

Follow the trend: When market enthusiasm is high, going with the flow is often a wise move, but strict discipline must be maintained. Focus on assets in a strong upward channel, and never blindly chase rising markets without a solid plan.

Take Profit: Set clear goals and execute them decisively. When the market is generally bullish, it is easy to develop a greedy mindset, but taking profits in batches during the uptrend can effectively avoid the regrettable "roller coaster experience": watching your gains quickly evaporate during subsequent pullbacks.

Risk management: Even in a bull market, pullbacks can occur. Effectively use stop-loss or trailing stop-loss to lock in profits and guard against sudden reversals. This precaution will ultimately prove its worth.

Defensive positioning: Sometimes, the smartest trading decision is to not trade. Converting part of the portfolio into stablecoins or holding relatively low-volatility assets like Bitcoin and Ethereum (ETH) can effectively preserve capital during market panic.

Dollar Cost Averaging (DCA): Trying to precisely capture the market bottom? Extremely difficult. The DCA strategy lowers the average cost by spreading entry points over different times, helping investors maintain market participation without overexposing themselves to risk.

Focus on fundamentals: Bear markets will sift out market noise. Projects that can survive in adversity usually possess real application value, a strong team, and a long-term development vision. If you decide to continue holding during a market downturn, make sure your decision is based on sufficient and reasonable grounds.

Regardless of the bull or bear market shifts, the cryptocurrency market never stops, but that doesn’t mean you have to react to every price movement. Price trends, market sentiment, trading volume changes, and fundamental analysis can help you assess the current phase of the cycle you are in. By equipping yourself with the right analytical tools and maintaining calm thinking, you can filter out market noise and make clear decisions.

The market always favors prepared investors, and understanding whether you are in a bull market or a bear market is one of the most powerful investment tools you can have.

Happy trading!