Digital assets are highly volatile. The price of the asset class can easily go up and down—and very quickly. The period in which the price of a particular cryptocurrency soars is known as a bull market. During the bull market, crypto traders are usually optimistic. They are prepared to hold their tokens and sell them later at a higher price. They do this when the prices of these assets get to their peak position.
While it isn't complex for traders and experts to identify bull markets, there isn't any specific factor that determines if we are in a bullish season. Just like the bear market, where there is a 20% drop in the price of digital assets, during bull runs the price of cryptocurrencies experience huge gains in market value.
Bull Market 101
Bull markets commonly occur when the economic atmosphere is getting strong or is stable. In traditional markets, a bull run can be called when there's an increase in corporate profits and a strong Gross Domestic Product (GDP).
Meanwhile, in crypto during a bull market, there is usually a rise in investor confidence, a rise in demand for digital assets, a high rate of trading, and growth in the price of tokens. The length of crypto bull markets is usually difficult to predict.
In any case, if we carefully study the highs and lows of the top dog digital asset Bitcoin (BTC), we will be able to determine how long bull runs can last. Bull markets have been known to last for as long as months, and even years in unique situations.
Note that the key factor that determines the length of a bull market in crypto is the market sentiment. We used BTC as a yardstick in this case because the rest of the market moves along with it. This is why analysts follow BTC's history. This helps them to understand when a bull market is about to begin and when it will likely end.
How to Identify a Bull Market: Positive Market Sentiment
It is usually challenging for traders to identify a bull market. First and most importantly, there will be a lot of optimism when it comes to digital assets. The market will slowly bounce back from a bear run.
It will be in good shape following this past drop in value. For example, everything concerning digital currencies on the news will be positive. If this is the case, then you can be prepared for a rise in the value of cryptocurrencies.
Spotting the End of a Bull Market
Many reasons can lead to the end of a bull run in crypto. These reasons can vary. The chief of them is when investors begin to feel nervous and pessimistic. This behaviour can trigger the end of a bull market, and it can come from reports concerning digital assets or a piece of economic-related news.
However, traders must determine the end signals on time. This means traders must critically study any reversal before reaching any conclusions on whether it is indeed the end of a bull market. Traders should study the price movement over an extended period.
As time passes, investor confidence will begin to decline. Factors like pandemics, particularly the coronavirus outbreak, can be a trigger. Sometimes the government can issue an unfavourable policy concerning digital assets, which can trigger a reversal.
It isn't uncommon for a rapid drop in the price of digital assets to begin following a bull market. This happens because most investors begin to feel that the price of crypto will keep dropping. In the end, the bull run will come to an end. Investors will likely sell their coins to manage losses at the end of a bull market.
How Can Traders Benefit From a Bull Market
Traders can benefit from bull markets by doing the following:
Taking Long Positions
A long position can be called when traders buy securities because they believe their price will increase in the future. The difference in the price of the token represents your profit. During a bull run, any losses you incur are mostly temporary and minor. Investors can invest in cryptocurrencies confidently due to the higher chances of earnings.
Exercising Call Options
A call option is the right to buy coins at a certain price before an expiration date. Call options can rise in value. If the price moves past the strike prices, buyers use their right to buy at a lower rate. After this, they can then trade it at a higher price for a profit.
A retracement can be called when the overall price trend of a digital asset reverses. Note that during bull markets, sometimes the price of tokens will experience short price dips. Sometimes the general trend can continue rising. An experienced trader can identify retracements and know when to buy more tokens. The price of a digital asset can quickly rise as long as the bull market is sustained.
Currently, more people are looking to trade in cryptocurrencies because they believe that dealing in the asset class is highly lucrative. However, before joining the sector, make sure you know what's involved in handling the risks of trading cryptocurrencies, and how bull and bear markets can work in your favour.