Where the names come from
A bull market is a sustained period of generally rising prices, and a bear market is a sustained period of generally falling prices. The terms come from traditional finance, where they were used for stocks long before crypto existed. The usual image is that a bull thrusts its horns upward and a bear swipes its paws downward.
There is no official body that decides when a phase starts or ends. The words are shorthand, and different people use them differently.
Common rules of thumb
In stock markets, a frequently quoted convention treats a fall of 20 percent or more from a recent high as a bear market, and a rise of 20 percent or more from a recent low as the start of a bull market. This is a convention, not a law of nature.
Applying the same rule to crypto causes trouble. Crypto prices are far more volatile than stock indexes, so falls of 20 percent happen often, including within periods most people would still call bullish. Many crypto commentators therefore use larger thresholds, or look instead at the broader picture: whether prices are making higher highs and higher lows, or lower highs and lower lows, over a span of months rather than days.
Another common approach is to compare the price with long moving averages, such as the 200-day average, and call the market bullish while the price stays above it. This is a simple rule, and it will sometimes flip back and forth in choppy conditions.
Some people define phases by cycle: from the low after a major decline up to the next major peak is the bull phase, and the decline from that peak is the bear phase. Many have linked these market cycles to the roughly four-year halving schedule, though how much that link matters is debated and halvings are not a guarantee of anything.
Why the labels arrive late
The central problem is that a phase can only be identified with certainty after it has happened. A peak is the highest price seen, and you cannot know a price is the peak until later prices stay below it. The same is true of a bottom.
In practice this means:
- A bear market is usually declared only after a significant fall has already occurred.
- A new bull market is usually recognized only after prices have already risen meaningfully from the low.
- Within any phase there are sharp counter-moves, often called relief rallies in a downtrend and pullbacks in an uptrend, which look like a change of direction but are not.
So the label tells you mostly about the past. People who say “we are in a bull market” are often describing a trend that has been running for some time.
Common mistakes
Treating the label as a forecast. Saying a market is bullish describes what has happened. It does not promise that prices will keep rising, and many bull markets have ended abruptly.
Calling the top or the bottom. Repeatedly announcing that the bottom is in, or that the top has arrived, is a common habit, and many such calls are wrong. Since it is only clear afterward, early calls are guesses.
Confusing a bounce with a new bull market. In a long decline, rallies of 20 percent or more can occur and then fade. A rise of that size alone does not settle the question.
Judging by one coin or one timeframe. The price of one asset may rise while the rest of the market falls. A daily chart may look bearish while the weekly chart looks bullish. A statement about the market should say which asset and which timeframe it means.
Assuming the next cycle will copy the last. Past cycles are sometimes used as templates. But there have only been a handful of full cycles, the market has changed in size and structure, and different drivers, such as interest rates or regulation, have mattered at different times.
Letting sentiment decide. In a long rise, enthusiasm builds and caution can look foolish. In a long fall, pessimism can become extreme. Swings between FUD and FOMO tend to peak near turning points, which is hard to see from inside the market. Market sentiment is a context for these swings, not a reliable signal for entering or exiting.
Ignoring the size of the fall. After a fall of 50 percent, an asset must double to get back to its previous level. Calling the move a mere dip can hide this arithmetic.
Using the labels sensibly
The terms are useful as a description of the general mood and direction over a period. They are less useful as a trading instruction. A more careful way to use them is to ask what evidence supports a given label, over what timeframe, and what would count as evidence against it.
It also helps to remember that no one can reliably time phases. Cryptocurrency prices are volatile, past cycles do not predict future ones, and people can lose all they invest. This article is educational and is not financial, tax or legal advice.