I welcome you all steemians to another week contest titled: S4B Crypto Contest.** This is a contest that try to test how knowledgeable we are or could be in the crypto space. Considering the wide adoption of cryptocurrency around the globe, it becomes a subject matter of necessity to keep pace with the evolving events. @waqarahmadshah has been doing a good job to challenge our intellect and keeping us engaged in the community. This contest would further broaden our knowledge about the crypto market in relation to the traditional markets like the stock market. So let's give the contest a good try.
The Bull and the bear are 2 key terms often used in the crypto market and that of the traditional stock market. These terms are used to describe the market condition over time. Each of the markets could either be running in a bull or bullsh condition or in a bear, or bearish condition over time.
The bulls are the traders or investors who have open “buy” positions as the market gains a sustained uptrend by the increase in prices; and the term “bullish” is used to describe the general market condition dominated by traders buying the crypto assets or stocks. On the other hand, the bears are traders or investors who have open“sell” positions as the market heads down to a sustained downtrend by the decrease in prices; and the term “bearish” is used to describe the general market condition dominated by traders or investors selling their crypto assets or stocks over time.
In cryptocurrency market, bull run historically sets in after the parent crypto, Bitcoin halving occurs. This happens every four years and the bull runs for a short period of six months or up to a year. When the bull run reaches its peak, then the market starts declining to downtrend where the bear cycle starts to set in.
In the traditional stock market, the bull cycle is often associated with a booming economy. Increase in employment levels, production, per capita income, exports etc, are the strong economic instruments that could trigger bullish sentiments in the stock market. The bull cycles happens more regular in the stock market than in cryptocurrency market strong and lasts to some years giving investors or traders enough time to take long positions in the market.
In a declining economy, the bears sets in prompting trader and investors alike to sell off holdings in the stock market. This indicates job cuts or losses, and slowing economic growth.
[source] A shot from Bybit Exchange
Just like the stock market, the bullish and bearish market reversal or conditions signals a remarkable turning points in cryptocurrency market. At the peak of the bullish run, where buyers would be unwilling to purchase crypto assets at higher prices, sellers would be expected to come in to drive the market down by selling off their crypto assets or holdings.
The same sentiment is obtained when prices in bearish market is at the bottom. At this point, sellers would have exited the market and buyers would be expected to come in and drive the market up.
But just noticing these two market scenarios does not mean you should make entry open positions. There are indicators that marks the these two turning points for confirmation. I would be highlighting few indicators that could be used to confirm a transition from the bear to the bull market. They are:
The Moving Average Multiplier
This is a bearish market indicator that measures the depth or bottom of the market. The four (4) year SMA is one of the Indicators that could be used to mark the transition from bear to bull. This 4 year SMA measures the 4 year bitcoin halving cycle. If bitcoin price go below the 48 SMA, and rises above the SMA, then there is the signal that an end to the bearish cycle has come to an end.The 200 Day Simple Moving Average.
This is another indicator that could mark an end to the bearish market. When prices on the daily charts pull through and close above the 200 SMA for some days, then there is the signal that the bearish trend has come to a close. The bulls now be prepared to takeover the market.The Relative Strength Index(RSI)
This is a very strong indicator that could also be used to spot out an end to a bearish run. It works better when applied on a longer timeframe. To confirm that the bear season has ended, a weekly RSI rising above the 50 mid-point could mark the bearish end.
Psychology has an influence when traders and investors are making their various decisions. This is reflected on the reasons they take their respective market decisions.
Some of the factors Influencing Investors behavior during crypto bull and bear markets include the following:
During the bull market:
The psychology behind the bull market is reflected by investors and traders optimism, rising hopes, economic expansion and recovery. The strong economic indices pulls investors and the traders confidence towards the willingness to take risks.
The bear market
Investors psychology in the bear market is reflected by the fear factor. No trader or investor wishes to lose money in the market and this gives a negative market picture as it would lead to improper market analysis. Panic selling would often set in and then force prices to go down.
- The Feel Of Disappointment is another influential behavior that reflects traders or investors psychology in a bear markets. After having or expressing optimism of market potential upswing and then the market could not meet the expectations, investors and traders would feel disappointed. This psychology would also reflect in the prices of the crypto assets and force traders and investors to sell off their holdings.
In summary, the bull market is characterized by the the ability of traders and investors to take risks while that of the **bear market reflects the risks averse nature of Investors and traders that now translates to the bear market.
I hope that this contest has further broadened our knowledge with regards to the psychological factors that influences the behavior of investors and traders both in the bull and bear markets.
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