When the Bulls Are Running: How to Spot and Capitalize on Crypto Bull Markets
Regardless of whether the crypto winter is truly over, the smart money is preparing for the next meteoric market rise. Your opportunity to build generational wealth could be just an altcoin away. So grab your digital Stetson and join the ride!
Bull markets are every crypto investor's dream — a chance to surf a wave of green candles and lock in life-changing returns. But navigating a bull market can be a challenging experience. This guide will help you ride the raging crypto bull with caution and courage.
The stars seem to be aligning for crypto. According to much-vaunted analysts at Bernstein, the collapse of the infamous FTX exchange cleared out the last of the "toxic leverage" in the market, igniting a new optimism in crypto. As concerns grow over the centralization of money in traditional banks, bitcoin is continuously waxing as a safe-haven asset. With macro factors favoring bitcoin and Ethereum's blockchain continuing to improve, the new crypto bull run is just getting started. Considering both bitcoin and ether have rallied almost 80% so far this year, the future looks awfully bright, doesn’t it?
After such a prolonged crypto winter, you might not feel relieved just yet, however. And that’s okay, because navigating bull markets requires courage as well as caution. Lucky for you, we’re here to help you spot the signs early, have a plan to maximize gains, and know when to get out before the bears return.
Cryptocurrency Bull Market Definition
A crypto bull market is characterized by an overarching excitement and optimism that take over the market. Investors rush in, demand skyrockets, and prices surge upward. At the first signs of a bull run, crypto prices start trending up quickly as investor confidence grows. The positive sentiment sparks a feedback loop of more investment and higher prices, with FOMO eventually fueling the mania and drawing in more and more speculative money.
Crypto bull markets can be a chance for some to ride a rocket ship to the moon and lock in those coveted parabolic gains. For others, however, a bull brings nothing but the monumental danger of getting caught up in irrational exuberance. If you don’t want to end up being the last one left holding the worthless bag when the bulls eventually tire out, you have to know when to walk away from the stampede unscathed. The key is spotting the cycle and seizing the opportunity at the right time.
Bull and Bear Market Difference
Bull markets are a crypto investor's best friend. When the bulls are in charge, the market is on the rise. Investor optimism is high, the economy is strong, and crypto prices are going up. In a bull market, fortunes can be made as crypto assets surge in value and investors ride the wave of gains.
Bear markets, on the other hand, are every crypto investor's nightmare. When the bears take over, the market declines. Investor sentiment turns negative, the economy weakens, and crypto prices crash. In a bear market, portfolios can be destroyed as assets plunge in value and investors are left with heavy losses.
The crypto market will always have ups and downs. But for the investors who can stay rational and detached while others succumb to fear and greed, there are opportunities to profit in any type of market. The key is knowing whether the bulls or bears are in charge and how to respond accordingly.
Bull Market vs Bubble
Bull markets and bubbles are not the same. A bull market is a period of sustained price growth based on solid fundamentals and investor optimism. Bubbles, on the other hand, are dangerous, speculative frenzies that inflate asset values far beyond reason. While bull markets can generate massive gains, bubbles always burst — and the results can be financially devastating.
In a bubble, hype and mania cause asset prices to become completely detached from reality. Investors pile in based on a fear of missing out, unaware that the market has become overinflated. The forces driving the bubble can't support such exaggerated valuations for long. When sentiment turns, it sparks a rush for the exits that craters prices. Many are left holding worthless assets.
Bull markets build wealth over the long run, but bubbles destroy it overnight. As crypto markets heat up and valuations become stretched, the line between bulls and bubbles can blur. The investors who can spot mania rising, avoid getting swept away by hype, and keep their feet firmly planted on the ground even as others greedily grasp for the sky are the ones who come out of bubbles unscathed.
How to Identify a Crypto Bull Market
While there's no one-size-fits-all metric to pinpoint a bull market, there's a widely accepted definition: when prices surge by 20% or more from recent lows, you've got yourself a bull market. Now, predicting bull markets is no easy feat. In fact, analysts usually spot them only when the rally is well underway.
But don't worry; there are telltale signs to help you spot the bull:
- Surging trading volume: As more investors jump on board to buy and hold crypto, expecting sweet capital gains, trading volume soars.
- Increasing demand: In a bull market, crypto demand outshines supply as an eager crowd of investors clamors to buy, but few are willing to sell. This fierce competition pushes prices higher.
- Tempting investor confidence: Rising crypto prices fuel investor confidence, enticing more people to enter the market, expecting handsome returns.
- Soaring liquidity: Bullish markets boast higher liquidity, enabling lower transaction costs as investors anticipate swift, steady returns.
- Improving fundamentals: Companies grow more confident in taking risks, fueling international investment, business growth, product development, and feature updates. Surging profits drive more expansion and attract more manpower into the industry.
If you never take fundamentals at face value, you might want to confirm the improving market sentiment by analyzing the charts.
Technical indicators analyze past price action to gauge where the market may head next. To tell if they are running into bulls, look for the following signs:
- Bitcoin dominance shows Bitcoin's share relative to other cryptos. During bull runs, dominance drops as money flows into alternatives. A rising total crypto market cap combined with falling Bitcoin dominance often signals a bull market.
- The relative strength index (RSI) measures whether an asset is overbought or oversold, indicating wider bullish or bearish sentiment. Cryptos are overbought around an RSI of 70, signaling peak bull market momentum. Under 30 means oversold, suggesting a bull run may start.
- Moving averages track an asset's average price over time, like 200, 50 or 20 days. When the price stays above a long-term average, it points to an upward trend. If the price crosses above a shorter-term average, it may signal the start of a bull run.
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Bull Market Example
Jimmy was a savvy crypto investor. When the market was down and assets were cheap, he invested in a promising project. Though he had to endure volatility for years, he held on, waiting for the next bull run.
Eventually, Jimmy spotted signs of recovery. Trading volume picked up as investors returned. His crypto's value started rising again. The market grew more liquid, and it became clear that the bulls were back.
As the rally gained speed, Jimmy's investment surged upward. His patience and vision were rewarded. By buying in at the bottom, he was perfectly positioned to ride the bull market up and lock in life-changing gains at the top.
While others panicked and sold at a loss during the bear market, Jimmy kept his cool. He did his research, invested in solid fundamentals, and held on until sentiment turned bullish again. Now, the same assets that were on sale years ago had skyrocketed in value.
Jimmy sold when it was time, walking away with substantial profits. The bull run didn't last forever — soon, the market turned bearish as the hype faded and valuations became stretched. But Jimmy had mastered the cycle. He preserved most of his gains, leaving a bit invested in case the next bull market offered another opportunity.
Jimmy knew crypto was volatile and cyclical. He didn't try to time the market or predict each turn. But by focusing on value, believing in the long game, and distinguishing bull markets from speculative mania, he was able to build wealth over time through the rises and falls. The key is keeping hope through the darkness so you're ready to once again ride the light.
How Long Can Crypto Bull Last
Imagine sailing smoothly on a golden bull market wave that never ends — it's tempting, but we must face the fact that even the most thrilling rides come crushing down.
Historically, other markets have seen bull runs with an average lifespan of about four years. Yet, the crypto landscape is young and rapidly evolving, making it tough to pin down the duration of its bull runs.
Let’s look back at historical trends. Back in 2014, Bitcoin endured a 14-month bear market, only to bounce back with a powerful 35-month bullish streak that stretched from early 2015 to 2018. Afterward, we witnessed a 14-month bearish phase, which ultimately gave way to a 33-month bull market. Fast forward to mid-2021, crypto enthusiasts buckled up for another bear market ride that seems to have ended now, in 2023. As 2023 rolls in, fresh optimism breathes new life into the industry. If expert analysis holds true and history echoes itself, we may be looking at another 33-35 months of exhilarating bullish momentum, possibly catapulting the crypto realm to a staggering $220,000 by mid-2026. So, hold onto your hats and enjoy the ride!
Bull Market Strategies: How to Invest in a Bull Market?
Jumping on board with a bullish market at the right moment is crucial — buy early and watch your investments soar, eventually cashing in on those higher prices as the market peaks.
However, if unforeseen circumstances (such as crises or regulatory actions) arise and a bear market looms, it's wise to downsize your positions, particularly in less-established cryptocurrencies. Temporarily shifting your holdings to assets like precious metals or cash can offer better stability during market crashes.
As bullish markets wind down, keep a lookout for lower-priced cryptocurrencies to expand your investments.
Below are a few strategies for riding the bull consciously and maintaining sustainable growth:
- Buy early: Catching the beginning of a bull run can be challenging, especially with the ever-changing crypto market conditions. Still, monitoring technical indicators and strong market sentiment can signal the start of a bull run. The earlier you buy, the higher your potential selling price.
- Plan profit-taking with sell limit orders: Banish the fear of missing out on bigger gains by consistently taking profits. Smart investors sell portions of their assets while retaining others for future growth. Leverage sell limit orders to automatically sell your crypto once it hits a predetermined market price, ensuring you lock in profits.
- HODL and reap the rewards: Holding onto your crypto lets you sidestep Capital Gains Tax, but that doesn't mean your assets can't generate income. Explore passive income opportunities like staking, lending, and providing liquidity — just be cautious when selecting DeFi protocols to prevent triggering unwanted taxable events.
- Amplify your gains with leveraged trading: While derivatives, margin trading, and leverage can be enticing during a bull market, research and risk assessment are essential. These products can multiply your gains by increasing exposure to the underlying asset, assuming the market moves in the right direction.
- Use automated crypto tools: With automated trading bots, you can trade more efficiently and capitalize on even minute price swings without having to watch the markets 24/7.
- Diversify your portfolio: Spreading your investments across various assets reduces risk and presents new opportunities. Analyze performance indicators like previous all-time highs, past performance, and roadmaps to guide your investment choices.
- Prepare an exit strategy: Even bull markets come to an end. Tailor your exit strategy to ensure you've recouped your initial investment by the end of the bull run and hold a diverse range of assets for future growth.
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- The DCA trading bot follows the DCA trading strategy, which divides your investment into periodic buys or sells to get the best average price and cushion your position from big swings and market noise. In a bull market, you can open a long position and accumulate the coin at different price points or find the perfect times to trade by making your bot buy and sell following indicator signals. What makes this bot so special is the panoply of customizable options with robust hedging and trailing features.
- The GRID trading bot follows the GRID strategy, one of the simplest yet effective strategies to make consistent profits in crypto. Instead of spending hours analyzing charts, the bot buys low and sells high for you automatically, generating steady gains using the GRID settings you choose. While the GRID bot is specifically designed to work best in the swing market, you can still use it in bull markets during temporary respites and corrections where the price bounces within a horizontal price range. Otherwise, you may tamper with the bot’s settings and choose to place orders in the base rather than quote currency, which will allow the bot to buy and sell the same amount of the base currency with each trade. While this requires a larger investment, the bot will generate far bigger profits during market rallies.
- The COMBO trading bot for Binance turns up the heat on your crypto profits by being able to generate returns 1,000% faster thanks to the power of leverage. Bitsgap’s COMBO bot fuses advanced GRID and DCA algorithms to read trends and try to profit, no matter the market. The GRID tech executes flawless trades on every price move, while DCA gets you the best entries. Of course, bigger rewards mean bigger risks, so learn trading futures before you begin.
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When Is the Next Bull Market?
As we’ve mentioned earlier in the beginning of this article, the crypto bull run might already be happening despite short-term corrections, temporary dwindles, and, according to some experts, liquidity problems. We’ve also cited one major market analyst in our article on Surving Crypto Bear, Harry Dent, who predicted the major crypto crush of 95% in mid-July this year, so it’s really difficult to say. Suppose we’re still not running with the bull, then what?
According to yet other experts, the next major crypto bull run may start after Bitcoin's 2024 halving and peak in late 2025, which makes sense because the halving event, where Bitcoin's supply is cut in half, has catalyzed bull runs before.
Of course, there are no guarantees. But if enthusiasm starts building, prices stabilize and continue to rise, the seeds of a bull market may be sprouting. Still, many unknowns remain. Regulation, security issues, or other black swans can derail the market at any time. The only sure things are uncertainty and volatility. Stay alert, do your homework, and if you spot the right signs, get ready to hop on a wild and thrilling ride.
Can a Bull Market Last Forever?
No market rally lasts forever. Those who believe the good times will roll endlessly often see their gains wiped out by greed. In any market, not just crypto, knowing when to take profits is key. But many have gone broke waiting for bigger returns that never came. When the bull looks tired, don't be afraid to take your winnings off the table while you're still ahead of the herd. The next cycle will be here before you know it, and you'll be ready to ride again!
What Is a Bull Trap in Crypto Trading?
Bull traps lure in unsuspecting traders by making false promises of big gains ahead. Just when you think the bulls are back in town and pour money into the market, the bears return to steal your lunch money!
In crypto, bull traps often appear as a sudden price spike that stirs excitement and FOMO. Traders rush in, believing the recovery is here and the rally is on. But soon prices retreat, hopes of gain turn to fear of loss, and the trap is sprung. The "breakout" promptly breaks down, leaving traders holding overpriced bags.
With experience, you'll get better at detecting traps before they snap shut. You can also practice spotting these and many other market setups with Bitsgap's demo mode that lets you trade crypto risk-free before you’re ready to commit your own capital and enter the real game.