Bull vs. Bear Markets: Meaning, Differences, and How to Invest

Markets move in cycles, alternating periods of growth and decline. These cycles are referred to as “bull markets” and “bear markets". Traditionally, they are shaped by economic factors such as GDP, unemployment, and corporate earnings. In crypto, they are driven by technological innovation, regulatory changes, and shifts in adoption and sentiment.

Understanding these cycles is critical if you’re investing in any of those markets. In this article, we will look at what determines market phases, highlight the differences between traditional and crypto markets, and look at actionable strategies for each. We will begin by looking at what a bear and bull market is, and move on to how to predict and identify them.

Strong economic growth, low unemployment, and rising corporate profits in traditional markets often increase trading activity and confidence. This favorable environment can push asset prices up at least 20% from recent lows - a hallmark of the former market. In crypto, this phenomenon is playing out under an almost identical name: a crypto bull run. Here, innovation, growing digital asset users, supportive regulations, and online excitement drive prices higher, attracting new lows and eager investors looking to buy and sell cryptocurrency. However, whether these are stocks or cryptocurrencies, the subsequent pairings are not completely risk-free. Sometimes, prices can become inflated or even form speculative bubbles that can burst if market sentiment changes abruptly.

What do you get when you mix consumer spending, population growth, and a post-war economy? The perfect examples of bull markets. In the years following World War II (1949–1956), consumer spending and a booming population drove the S&P 500 up 267%. Now look at the 1920s: the economic boom, market speculation, and then the Great Crash of 1929. Looking at all of this, the Roaring Twenties brought a surge in economic growth and market speculation, but that optimism ultimately led to the Crash of 1929. Markets give; markets take.

And in cryptocurrency, investor anxiety has transformed markets time and time again. In 2017, Bitcoin soared to nearly $20,000. Why? Retail investors were going crazy for ICOs. Projects were launched left and right, many of them failed miserably. Fast forward to 2020–21: DeFi and NFTs stole the show.

Decentralized finance (DeFi) and non-fungible tokens (NFTs) exploded, fueled by increased institutional interest and broader crypto adoption. Institutions piled in, and adoption soared in tandem.

Here’s the thing: history repeats itself. Overall, these episodes highlight how powerful investor enthusiasm can push markets to extraordinary heights before the inevitable corrections occur.

In a bull market, the rule is “buy and hold”, especially when it comes to strong assets that start to bear fruit over time. A bull market generously rewards patient investors, and in the world of crypto, this means choosing projects with real applications and sustainable long-term potential. However, patience alone is not enough. Another approach is needed - sector rotation, focused on hot topics such as DeFi, NFTs, or second-layer solutions. When is this method especially effective? Precisely during downturns, when you can buy assets at better prices. It seems that the best deals bring the biggest profits - but it is not that simple. Trends like DeFi, NFTs, and second-layer solutions change as quickly as the wind, and diversification is your reliable shield. They are hot today, and may not be relevant tomorrow. If you are considering buying crypto with an eye on growth, sector rotation will help you stay one step ahead. Split your investments between Bitcoin, Altcoins, and Stablecoins to reduce risk. Momentum can be profitable, but it doesn’t last forever. So what’s left? Real innovation that can solve real problems and create real value. Smart investing is the key to success. To choose promising projects, focus on innovation, practical application, and a solid foundation. Fasttoken, Altcoins, and Stablecoins – each of these assets has its place. Buying during short-term declines can provide better deals and increase returns, because risk management is paramount. Putting all your eggs in one basket is foolhardy.

Ever wondered why it’s called a bull market? The term dates back to the 18th century and comes from the way a bull attacks. This upward motion became a metaphor for rising prices.

In a bear market, asset prices fall steadily, often by 20% or more from previous highs, and these declines can last for months or even years, with a slowing economy and declining corporate profits. These events are often caused by rising unemployment or global crises. Similar trends are seen in the cryptocurrency world, where the downturn is called a “crypto winter,” caused by tighter regulation, lower adoption, and a decline in user confidence. Bursting speculative bubbles, sudden liquidity shortages, or technological failures can further worsen the crypto market, which is clearly reflected in growing investor fear. However, such difficult periods also present opportunities for those who act wisely and in a timely manner, as we will discuss in more detail in the following sections.

Crypto patterns are surprisingly unpredictable, perhaps more so than financial markets (if we talk about bears, of course). In 2018, Bitcoin unexpectedly crashed from almost $20,000 to $3,000, which shook the market. Terra/Luna and FTX projects deprived investors of confidence in the future, collapsing in 2022. Economic history will forever remember the Great Depression: from 1929 to 1932, the Dow Jones index fell by almost 90%. This left a mark as deep as the financial crisis of 2007-2009, which demonstrated that even resilient systems can not withstand a sudden downturn. During that crisis, the market fell by 56%. You probably also remember how the COVID-19 pandemic dealt a powerful blow: in 2020, the S&P 500 index fell by 34% in a month, turning the usual course of events upside down. All these examples clearly demonstrate that both traditional and digital markets are subject to rapid changes that require flexible and thoughtful strategies.

You can protect yourself from market fluctuations by spreading your investments across different assets - bonds, cash, real estate, and in the crypto, not forgetting altcoins, DeFi tokens, and NFTs. An effective tactic is “tax-loss harvesting,” when selling unprofitable positions compensates for gains in other assets - a method successfully used in both the stock and crypto markets. If you think about which crypto to buy today for short-term, then experts strongly recommend that short-term crypto traders focus on assets with high turnover and quick recovery ability. Cost averaging, which involves regularly investing a fixed amount, helps you buy more when prices fall, thereby reducing the impact of volatility. Additional protection can be followed by defensive assets: utilities and healthcare are considered stable in traditional markets, while stable coins and proven projects like Ethereum and Fasttoken attract attention in the crypto sphere. Rather than panicking, investors avoid selling assets during sharp declines, as this is precisely what consolidates losses and deprives them of the opportunity to profit when the market recovers. An integrated approach that combines all of these strategies creates a solid foundation for preserving the value of a portfolio and subsequent growth, paving the way for future success.

The term dates back to 18th-century London, where bearskin traders would sell skins they didn’t even own yet, betting that prices would drop so they could profit.

Now that we've covered the basics and historical examples, let's look at what is the difference between a bull and a bear market and how to identify them as they are coming in real-time.

Let’s see what is the difference between a bull and a bear market by breaking down their key characteristics:

New investors entering the market drive trading volumes higher, while exchanges benefit from increased liquidity. Strong price gains - often 20% or more from recent lows - come as leading cryptocurrencies like Bitcoin, Ethereum, and a variety of altcoins begin to gain value. Increased adoption of cryptocurrencies, favorable regulation, and technological advances like DeFi and Layer-2 solutions are all clear positive signs. The 2017 bull market was driven by the ICO boom, while the 2020–2021 rally was driven by innovation in DeFi and the emergence of NFTs. History shows that understanding these signals makes it easy to recognize a bull market, as the constant influence of innovation drives prices higher.

Understanding a bear market is just as important. The following key signals are to look for. Crypto prices drop by 20% or more from recent highs, often triggering widespread sell-offs, especially among leveraged traders. Volatility spikes, with wild price swings reflecting fear and uncertainty in the market.

Another sign is if the crypto economy starts to show strain. Social media buzz dies down, developer activity slows, and fewer new users enter the sphere. Riskier assets like meme coins and low-cap altcoins tend to crash harder, while safer projects like Bitcoin hold up better.

Now you know how to identify them, but can you predict bull market vs bear market? Here is what you need to improve the odds of predicting - combining fundamental research and behavioral insights. So, let’s take a look at the psychology behind the markets.

The transitions between bull and bear markets should be anticipated. Provided that as an investor you want to maximize profits and minimize risks. Understanding these psychological factors can help you better understand the dynamics of the market rally and investor behavior.

The transitions between bull and bear markets should be anticipated. Provided that as an investor you want to maximize profits and minimize risks.

The optimism cycle that underlies the psychology of a bull market is that rising prices and positive news attract new participants. This further increases the value of assets, so watch your emotions, because they and biased estimates largely determine how this process develops. Driven by greed, many seek high returns, often ignoring the associated risks. A clear example of this is the crypto rally, when little-known altcoins and meme tokens, like the recent “Trump Coin”, became an object of investment.

Sometimes overconfidence leads to the belief that success is determined solely by skill, which leads to ignoring the role of luck and favorable market conditions, an example of which was especially noticeable during the ICO boom in 2017.

Fear of missing out (FOMO) often drives impulsive buying of overvalued assets. We have already seen this in the 2021 bull market with tokens like Dogecoin and Shiba Inu.

Prices are falling and seem irreversible because in 2008 the markets collapsed so suddenly and mercilessly that billions of dollars evaporated overnight and people started selling assets to avoid further losses. But instead, they only made things worse by causing a chain reaction of collapse that swept away everything in its path and now in 2022 when the crypto world faced a new round of chaos, traders again ran to get rid of positions in a hurry. And they missed the opportunity to buy at a low price because Terra / Luna collapsed and those who did not have time to save themselves were drawn into a whirlpool that sucked them deeper and deeper. And many hid in stablecoins as a last refuge and others simply exited the game, refusing to take risks. Why? Because the fear of losing everything turned out to be stronger than greed, but fear is not just an emotion. It haunts every investor and is amplified by herd behavior when everyone starts acting the same way. It is like panic that spreads faster than anything else. Now the euphoria that recently inflated asset bubbles turns into the bitterness of defeat because the market lives in cycles that sometimes soar to the skies and then fall into the abyss. You must always understand that negative news becomes fuel for this panic, forcing people to act quickly, thoughtlessly, and impulsively, making decisions that they will later regret.

All this reminds us how important it is to remain sober-minded and focused on the basic principles because, in a world where emotions rule the roost, only cold calculation can be salvation, so read this article carefully.

Now let's look at how cognitive influences change behavior. These biases can amplify their impact on economic growth, so I want to share a few examples that really impressed me.

The first thing that caught my eye was confirmation bias. Investors look for and notice only the information that they like and that matches their expectations. For example, when the cryptocurrency market was rapidly growing, people around them saw only success stories and easy profits.

If no one wanted to hear the warnings and alarm signals, then there is another amazing phenomenon called anchoring. A person literally clings to a specific number, for example, a record price of an asset, and does not want to part with it. Even when the market starts to collapse and it is obvious that something needs to be done, he stubbornly waits for a return to his favorite mark and eventually loses his money.

And the last thing that should catch our attention is the recency bias, which makes people believe that the current situation will last forever. After the rapid recovery of the markets after the COVID-19 pandemic, many were confident that the growth would continue indefinitely. But 2022 came and the reality changed dramatically. It all ended with the Market crashing, and those who blindly believed in constant growth were greatly disappointed.

In general, adaptability can be called the main quality of those who want to understand the intricacies of the market. Prices are constantly changing, bright headlines of economic news flash, investors' emotions are seething - an attentive observer will be able to catch useful signals among this noise. The better you understand the mood of market participants, the more effectively you will adjust your own actions and plans.

This is especially relevant now, when investing in cryptocurrency and Web3 is becoming a popular activity, and governments of different countries are looking into the future of crypto with cautious curiosity, trying to figure out whether it is worth getting involved with such technologies in the long term. Of course, you should not neglect tools such as technical analysis or follow market indicators, but, frankly speaking, it is not the ability to count charts that makes a truly successful investor, but the ability to calmly react to unpredictability.

The market is full of emotions - fear, greed, euphoria, despair, hope - but exactly at the moment when you allow yourself to succumb to at least one of these emotions, mistakes begin.

The main challenge in a bull market is to resist the temptation to risk too much, because the tempting prospects of quick riches can turn the heads of even experienced players.

Discipline, on the other hand, will allow you to keep a clear mind and avoid rash decisions.

When the situation changes, and the market goes from growth to decline, a new challenge appears - to resist the temptation of panic and disorderly selling.

At this point, you need to focus not on the moment, but on your strategic plan, and perhaps even look for opportunities where others in horror dump assets, ready to give them away for next to nothing.

How long does a bear market last?

On average, bear markets last about 9.6 months.

How long does a bull run last?

Bull markets typically last around 2.7 years.

Is it better to buy in a bull or bear market?

Investing during bear markets can be advantageous, as asset prices are lower, potentially leading to higher returns when markets recover. However, this strategy carries higher risk. Investing during bull markets may offer more immediate gains but often at higher prices. A consistent investment approach, regardless of market conditions, is generally recommended.

Should you sell in a bull market?

Selling in a bull market can lock in profits, but it's essential to consider long-term goals and potential tax implications. Rather than timing the market, maintaining a diversified portfolio aligned with your objectives is often more effective.

Is 2025 a bull or bear market?

As of January 2025, the market is experiencing a bull phase, with U.S. stocks rising around 4% early in the year. However, analysts advise caution due to potential risks like volatile bond markets and high stock valuations.

What are the expectations of a bull market?

In a bull market, investors anticipate rising asset prices, economic growth, and increased investor confidence. While optimism prevails, it's crucial to remain vigilant for signs of overvaluation and to manage risks appropriately.

What is the largest bull market in history?

The bull market from March 2009 to February 2020 is considered the longest in history, lasting nearly 11 years and resulting in a cumulative return of over 400% for the S&P 500 index.