What is a Bull Run? Understanding Bitcoin Markets

Are we in a bull or bear market? Learn the differences between these markets and the implications for Bitcoin as an asset in this blog post

What is a Bull Run? Understanding Bitcoin Markets
May 6, 2024

Definition of the terms "Bull Run" and "Bull Market"

The term "Bull Run" and "Bull Market" literally means "the bull's run" or "the bull's market." It refers to a period during which the prices of an asset or a group of assets in the same sector show a strong upward trend. This means that prices increase significantly over a relatively short period.

The image of the bull is used here to describe a bull that charges forward, destroying or pushing aside any obstacles in its way with its imposing body and sharp horns.

A Bitcoin Bull Run is somewhat like if Satoshi Nakamoto got on a bull and instead of being thrown to the ground like in a rodeo, the bull started running and breaking through the walls in front of them. Do you understand the metaphor?

This is exactly the image you should have in mind when talking about a Bull Run - a raging bull running. That's what every Bitcoiner thinks of when they see BTC rising by 20/30% in a few days, right?

How to know if Bitcoin is in a Bull Run?

Bull Runs are particularly strong upward trends, and rare enough to deserve a specific name.

For example, in traditional finance, a Bull Run is considered to start with an approximate 20% increase in prices.

A 20% gain? But Bitcoin regularly gains 20%, even during downward trends... Indeed, this is explained by the high market capitalization of the markets.

Take the S&P 500, which includes 500 companies. Some of these companies are worth twice as much as Bitcoin. For example, Amazon, the 7th most valuable company in the world, is worth $1.8 trillion, and Microsoft, the 1st most valuable, is close to $3 trillion. In comparison, Bitcoin's market cap is $1.3 trillion.

Imagine the vast amount of money needed to move the S&P 500's price by 20%, given its value is tens of trillions of dollars.

This is the main reason why traditional markets are considered to be in a Bull Run when they rise by (only) 20%.

For example, the S&P 500 price gained 117% between March 2020 and January 2022. Over this same period of almost two years, the price of Bitcoin increased by more than 1,500%, going from $3,800 to $69,000.

Bitcoin price (orange) and the S&P 500 price (pink)

The definition of a Bull Run when it comes to Bitcoin is much more ambiguous. Indeed, today Bitcoin is 375% higher than its lowest point a year and a half ago, yet it would still be too early to declare that it is truly in a Bull Run.

For everyone to agree that Bitcoin is in a Bull Run, it would need to sustainably surpass its most recent all-time highs, over $69,000.

What is a Bear Market ?

The term "Bear Market" literally means "the market of the Bear" and is the opposite of a Bull Run. It refers to a period during which the prices of an asset or a group of assets in the same sector are in a strong down trend. This means that prices drop significantly over a relatively short period.

The image of the Bear is used here to describe a bear that would prevent the bull from going further, positioning itself as an obstacle in the bull's path, ready to stop it with its sharp claws and teeth.

A Bitcoin Bear Market is thus like if the bear had managed to knock Satoshi Nakamoto off the bull's back and was attacking him to make him its next meal. Does the metaphor go too far at this point? Haha.

This is exactly the image you should have in mind when talking about the Bear Market - an enraged bear dragging you on the ground to its den to devour you. This is what every Bitcoiner thinks when they see BTC lose 10% in a day, right?

The market as a whole is a constant battle between buyers who think the asset will appreciate and sellers who think the asset will lose value. A constant fight between the bull trying to start his run and the bear trying to stop him.

When we are in a Bull Run, it simply means that the buyers have won the match against the sellers, and the bull has started his run.

However, like any living being, there will come a time when the bull will get tired and need to rest. That's when the bear, having time to catch up, will attack the resting bull.

In the opposite of the Bull Run, the Bear Market is considered by traditional finance as a decline of 20% or more. But as mentioned earlier, for Bitcoin it's different.

Indeed, between August 2015 and December 2017, the price of BTC increased by 12,000% while regularly facing corrections of 30 to 40%. I told you, Bitcoin is different.

Bitcoin price between August 2015 and December 2017

How to predict future Bitcoin Bull Runs?

Many investors try to analyze the price action of BTC to predict its future movements; this is called technical analysis.

Price action, or the price chart, is literally the projection of market psychology expressed as a curve. Indeed, when an asset like Bitcoin, a stock, or even a commodity like a packet of pasta is purchased, it means that both the seller and the buyer agree on the price.

It might seem trivial to say, but if the supplier and the buyer don't agree on the price of a packet of pasta, then the exchange won't happen, it's as if it really didn't have a price.

For the exchange to occur, either the supplier must lower their price, or the buyer must agree to pay more. When the BTC price shows $65,000, it means that both buyers and sellers agree on this price.

In short, a buyer is an actor who thinks the price is not high enough. They will buy and then wait for the price to reach a level they consider too high to potentially become a seller.

Technical analysis is based on the assumption that the price that buyers and sellers agreed upon in the past can help understand what might happen in the future.

Explained like this, technical analysis seems simple to understand, but in practice, it is much more complex to grasp. Mastering technical analysis can take years and even professionals often lose their bets.

A more accessible way to forecast the market is to analyze its fundamental implications. This means understanding and analyzing the economic and social context of an asset to try to grasp how it is positioned and how it might evolve in the future.

For example, the price of BTC has been rising since the beginning of 2023, mainly because:

  • It had dropped significantly in the previous months;
  • The inflation of fiat currencies has made value reserves like Bitcoin more attractive ;
  • The bank failure in March 2023 prompted people to question the robustness of the traditional financial system;
  • There was rumors of the approval of spot Bitcoin ETFs, a financial product that makes exposure to Bitcoin more accessible ;
  • The approval of these same ETFs which recorded several tens of billions of dollars in volumes from financial institutions and retail investors;
  • And finally, the projection of the halving, which reduces the issuance of new BTC, making it rarer.

All these factors are the main reasons that have pushed the price of BTC above $73,000.

However, it is impossible to assert with 100% certainty that this trend will continue over time, and if Bitcoin will one day officially be considered in a Bull Run. For that, it would need to surpass its historical highs sustainably.

The market considered Bitcoin to be in a Bull Run once its price far surpassed its most recent all-time highs (ATH). In 2017, BTC reached more than 1500% above its 2013 ATH, and in 2021, BTC went 250% above its 2017 ATH.

Today, we could potentially consider Bitcoin to be in a Bull Run if it reaches $100,000 and stays above $70,000 for several months.

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