The cryptocurrency market is known for its ups and downs, but a bull market is where prices soar, optimism rises, and opportunities grow for investors. If you’re new to crypto or want to understand how a bull market works, here we explore how crypto bull markets work, what their signals are, and how they compare to bear markets.
What is a bull market?
A bull market refers to a period where the price of cryptocurrencies rises steadily over an extended time, typically by at least 20% from previous lows. Investors become increasingly optimistic, demand grows significantly, and news coverage amplifies the hype. It reflects confidence in the market’s future growth, encouraging sustained buying. Various factors, including technological advancements, economic shifts, and social trends, typically drive crypto bull markets.
While bull markets are thrilling, they’re also challenging to predict in advance. Investors and analysts often only identify a bull market after it has already begun.
How crypto bull markets work
Crypto bull markets work by triggering several instances of market activity. Often driven by a mix of market sentiment, PnL, and on-chain metrics, a bull market begins when there’s high activity across all major indicators.
A bull market starts with high investor confidence, increased trading volumes, and a surge in demand for cryptocurrencies. On-chain metrics, such as Stablecoin inflow, tend to rise during this period as investors prepare to buy assets on the exchanges. Another way bull markets affect the market is when large portions of Bitcoins are moved outside of the exchange.s According to Glassnode, the proportion of Bitcoin held on exchanges has shrunk to just 12% of the circulating supply as of 2024.
Net Unrealized Profit/Loss (NUPL), which measures the overall profitability of the market, typically increases as users experience higher profits during bull rallies. Bull market peaks occur when profit ratios exceed 70%, indicating that we may be nearing a potential cycle high.
These trends are just a few examples that illustrate how bull markets operate and why investor confidence is on the rise. Understanding these metrics can offer valuable insights into market cycles and potential turning points.
How crypto bull markets start
Several factors contribute to the onset of crypto bull markets, creating a positive feedback loop of rising prices, increased confidence, higher retail spending, and an increased appetite for new technologies, which in turn become narratives.
Bitcoin halving: A significant event where Bitcoin mining rewards are slashed by 50%, reducing supply and increasing demand. According to Plan B’s stock-to-flow model, a bull market typically starts 1 year following the halving.
Macroeconomic events: Inflation fears often drive investors toward cryptocurrencies like Bitcoin, which are seen as a hedge against inflation. As seen in the 2020 pandemic, added capital can also trigger a bull market.
Institutional adoption: The entry of major corporations into the cryptocurrency market serves as a powerful driver for a bull run. With increased institutional participation and stricter regulations, the industry gains greater credibility, attracting a wave of new investors.
How long bull markets last
Cryptocurrency markets are characterized by cycles that typically begin with a bull market and conclude in a bear market. These cycles are periodic, and while not every cycle is the same, the tendency is that they often repeat. Historically, bull markets could last from a couple of months to up to a year. Other bull markets have run for close to 1000 days before they ended, and it’s important to know how long they last.
How crypto bull markets end
Bull markets turn into bear markets at the end of the cycle, where investor confidence resents and turns pessimistic, and can trigger more fear in investors’ minds. In periods following euphoria, investors still hope for additional price bounces, even though the market is flooded with negative news, such as exchange hacks or scandals, that can erode confidence.
Bull market vs. bear market
The dynamic between bull and bear markets needs to be understood, as it provides crypto investors with insights into how markets move and could help them make better-informed decisions.
A bull market is characterized by rising prices, high investor confidence, and demand exceeding supply. During this phase, the market experiences optimism, and prices tend to move upward, much like a bull thrusting its horns into the air. For investors, a bull market often presents opportunities for growth and profit as the market gains momentum.
In contrast, a bear market occurs when prices fall, confidence declines, and supply exceeds demand. This phase is marked by pessimism, with prices dropping steadily, resembling a bear swiping its paw downward. Understanding bear markets is essential for investors to navigate challenges, adjust strategies, and mitigate potential losses.
Crypto bull market strategies
Trading in a crypto bull market differs significantly from being active when price action and volume are lower. During bull markets, higher highs are more attainable. The market is typically green, and investor confidence is very high, which could position users for higher PnL. Here are some strategies that could be implemented.
- HODL: Buy and hold your crypto assets through the duration of the bull market to maximize gains.
- Buy the dip: Capitalize on temporary price corrections during an uptrend to accumulate more assets at discounted prices.
- Dollar-cost averaging (DCA): Invest a fixed amount regularly regardless of price fluctuations. This reduces the emotional bias of timing the market.
- Use stop-loss orders: Protect your investments with orders that trigger a sale when prices fall to a specific level.
Risks and benefits of crypto bull markets
Bull markets are attractive for investors, but they also come with risks. Here’s what you need to know:
Benefits
- Higher returns: Prices rise rapidly, resulting in substantial profits for early investors.
- Market growth: Increased demand often attracts new investors, developers, and innovations.
- Boosted liquidity: Transactions become more frequent and easier to execute, ensuring fair pricing.
Risks
- Volatility: Cryptocurrencies are infamously volatile, with sudden shifts that can turn profits into losses.
- Market hype: Excessive optimism can inflate prices beyond realistic valuations, leading to market bubbles.
- Limited regulation: The lack of comprehensive regulations increases the risk of scams and fraud.
How to trade bull markets
In periods of euphoria, when prices typically only go up, it’s difficult to pinpoint the best strategy for trading crypto. For both experienced and new traders, using platforms like Yiledfund allows them to take a hands-off approach to trading crypto and could maximize their profits.
Yieldfund offers up to 60% annual returns by trading the top 100 cryptocurrencies. Regardless if there are periods of volatility or the market is always up, Yieldfund presents a stable alternative that typically outperforms the market.
It’s a way to diversify the portfolio whole and, at the same time, simplify the investment process. Moreover, it enables investors to seamlessly transition from bull to bear markets without affecting their potential income.
Make the most of crypto bull markets
Crypto bull markets are a thrilling opportunity to achieve significant returns. However, they require smart strategies, continuous learning, and a strong grasp of market dynamics. By diversifying your portfolio, securing profits, and staying informed, you can maximize the benefits of these exciting phases.
If you’re ready to explore trading opportunities in a bull market, consider signing up with Yieldfund. Our platform streamlines the investment process, enabling you to maximize the value of your crypto assets with quantitative trading strategies and an easy-to-use platform.
