Market sentiment has always been a major part of any market, whether that is the housing market or a third-party market for out-of-print media and hobby materials. But what does market sentiment really mean, and what are the Bull and the Bear?
What Is Market Sentiment?
Market sentiment usually concerns two different terms: Bull market and Bear market. These are ways of defining how market sentiment has impacted a market and what kind of market it actually is – which is important to know before buying into it.
A Bull Market
A bull market is any period of time where a market is on the rise, has favorable economic conditions, and is generally going to have an uptrend in prices. Confidence in that particular asset has increased, which means that new investors are likely to get involved, raising the price.
If you buy into a bull market, you are buying into a situation where the value is increasing, but so is the number of investors. The value and buy-in price both get higher, but the economic conditions are also good, allowing for increased growth until something changes.
Since public opinion has an impact on how crypto grows and how the value rises, this often means that a bull market can actually start to snowball a little bit – but only temporarily.
A Bear Market
A Bear market generally happens at the end of a Bull market growth period. When a market is ‘bearish,’ it is starting to decline, typically by at least 20% or more over a set period. In a way, a Bear market is the opposite of a Bull market – confidence is dropping, and investors may pull out.
These are the big dips that a lot of people end up buying during since the reduced cost makes it easier to buy into the crypto. However, there is no guarantee that a Bear market will turn back into a Bull market, which is where the risk comes from.
What does this mean for crypto?
If you choose to invest in a Bull market, you are investing when the price is high. However, the good cryptocurrency market sentiment also means that the currency is continuing to increase and may keep increasing for a while.
The good thing about investing here is that you know the crypto has an increasing value, at least for a while. The buy-in price may be high, but you could almost immediately re-sell and turn a profit, especially if the growth is fast.
On the other hand, buying into a Bear market is cheaper – and far riskier. While a Bear market is likely to recover, especially if it is a very popular type of crypto, there is also a chance that some smaller crypto varieties can simply die outright from their massive dips in value.
However, if it does flip back into a Bull market – even if it takes over a year – then you can turn massive profits thanks to your low buy-in price. For an investor, this is a very appealing option, but it has to be handled with a lot of care.