What is a bull market?
A bull market is a type of market where the rate at which people are spending money is at its highest, consumer confidence is burgeoning and the economy has reached a pinnacle. Its opposite is a bear market. A bull market can be defined as a financial condition in which the prices of stocks or any tradeable item increase and are expected to increase in the future.
Imagine a stock market where everything is crashing and it’s like a war zone. From small investors to big ones, nobody is creating any dollars. All they are focused on is chaos – sheer chaos. Now imagine the complete opposite of it. That’s a bull market.
Before crypto, the bull market was a phenomenon only seen in centralized stock exchanges and markets. However, after the popularity and acceptance of cryptocurrency and blockchain, this phenomenon is manifested in decentralized finance (DeFi) and exchanges (DEX) as well.
The inspiration behind the term
The exact origin of the term is uncertain but it surely does symbolize a market where the share and stock prices are up like the horns of a bull. The bull market, in a literal sense, is a market that very much resembles the said creature. A market on the rise is powerful, terrific, and magnanimous like a bull in all its vigor, valor, and glory.
Bull is also a class of investors in the stock market. These are almost always of the view that their stocks are projected to be on an upward trajectory. But they don’t need to be mistaken for being overly optimistic because what they truly believe in, they make it happen.
Their can-do attitude, positive mindset, and bull-like personality can actually skyrocket the share prices and disrupt the market.
Moreover, they are also as strong as a bull because they don’t mull over short-term challenges or downfalls and very well know how to maneuver through them to reach their end goal – higher returns on their investments. Thus, a market that sees a price increase of a humongous level is like the one imagined by the bulls. Hence, the term bull market.
These are two possible definitions of the term. However, the first definition is used quite often.
When does a market become bullish?
Since 1932, there have been a good 14 bull markets. On average, such a market is said to last 3.8 months.
However, after the great recession of 2007, what we saw in the global market till the year 2020 when the pandemic hit, was the longest bull run perhaps in the history of the world economy.
Now, when it comes to declaring a market a bull or bear market, investors draw the line at 20%. If the stock prices have ballooned up to 20%, the market is bullish for sure. If it is the opposite, we are stuck in a bear.
The most famous bull market in modern times started at the end of 1982 and concluded in 2000. At this time some famous companies like Dow Jones Industrial Average (DJIA) and exchanges like NASDAQ earned a lot of profit, and their value in the market doubled and tripled.
A bullish market in crypto
A crypto bull run is not much different from traditional centralized bull runs. How it is generally characterized is by the anticipation of investors to capitalize on the asset’s price appreciation that yields substantial returns from their initial capital. Rings a bell? This is quite similar to the class of bulls in a traditional bull market discussed above.
Moreover, when it comes to a bull market in crypto, we see Bitcoin soaring high, falling down then repeating the drill. What happened in the BTC market currently was sort of bullish because, since the start of the year 2023, the said coin had seen a 40% surge in overall prices.
Moreover, you would remember that in 2021, at one point in time, one BTC was worth 70 grand. That was brutally bullish. The term bullish is used to represent market conditions like these in which there is a constant increase in stock prices.
Characteristics of a bullish market 👇🏼
There are different ways of recognizing a bull market because it has specific and distinct characteristics and they are as follows:
1. Skyrocketing prices
One of the most important and also the most common characteristics of a bull market is that the prices of stocks and shares are at an all-time high. A bull market may also be seen after a plunge in prices because a plunge gives more room to the base effect, allowing the prices to rise higher and higher.
2. Sky-high consumer confidence
Consumer confidence can also be applied to investors who generally are confident in their investments and have a good view of the market generally. This also leads to consumer spending because there is more spending of money than on the usual days when the market is not necessarily bullish.
3. Increased trading volume
When consumer confidence and consumer spending is soaring, the trading volume also sees a significant surge. This is because it is quite easy to make money off of a bullish market. This leads to more trading as well.
4. Low-interest rates
Another important factor that actually adds to consumer confidence and spending is the average decrease in interest rates. Low-interest rates open a window of opportunity for people to borrow money, take loans, and make investments in stocks or businesses.
5. Low unemployment
This may not necessarily be a sign but a byproduct of a bull market. Because money is being continuously spent and circulated, different opportunities for people open up. This leads to a somewhat decrease in the unemployment rate.
In conclusion, a bull market is a period of economic growth and increasing investor confidence in the stock market. Historically, bull markets have lasted for several years and provided substantial returns for investors. A bull market presents opportunities for investors to capitalize on market momentum and potentially earn significant profits.
You should be aware of a bull market because it will help you in making informed investment decisions, and determine the risk of your profits and losses.
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