Bull vs Bear – what have these animals got to do with crypto? And why are they fighting?
It wasn’t so long ago that I entered the world of crypto and was bowled over by the number of acronyms, concepts and funny names for things. Among the most frequent were bullish and bearish. I asked myself at the time what these animals had to do with crypto and so I went to find out.
Please note that I am not a financial advisor – I am not advising that you invest. I do not know your financial situation and you should always perform your own research and make up your own mind. Investing is a high-risk activity and you should only invest what you can afford to lose.
To be bullish means that you believe the market or asset will increase in value over a set time. To be bearish means the opposite – you believe the market or asset will go down in value.
What does bullish mean?
A bullish investor believes the market or asset will increase in value over a set time. Basically, a bull believes that the market or asset will go up. So when someone says that they are bullish on Bitcoin, they think that Bitcoin will increase in value.
What does bearish mean?
A bearish investor believes the market or asset will decrease in value over a set time. A bear believes the market or asset will go down. So when someone says that they are bearish on Etherium (however hard this person may be to find), they think that Etherium will decrease in value.
Interestingly, a market is considered to be bear when the price falls by at least 20%, but there is no strict definition for a bull market. Go figure.
Where do the terms bullish and bearish come from?
It appears that no one knows for sure the true origin of these terms, but the stand out theories are:
Bearskin sellers of old would often sell skins they hadn’t yet received. They would attempt to predict the future price of the skins and try to time when they bought the skins from trappers to coincide with a low price. If they predicted the change in skin price correctly, they could pocket the difference. The sellers would be expecting the market price to go down – bearish.
The origin of bullish is potentially more straightforward: due to the Brutal Bull-and-Bear Fights of the 19th-Century, bulls are seen as the opposite of bears and therefore, it makes sense that a bull market is the opposite of a bear market.
But, another common theory for the funny naming is that bulls attack by raising their horns upward, resembling a rising chart while bears attack by swiping down, resembling a downward chart.
Is it better to be bullish or bearish?
It’s not better to be one or the other, it is simply your feeling of how the market will perform. But if you are new to trading and have a bearish outlook, you may want to steer clear of investing until you feel bullish. There are ways to make money in a bear market though so experienced day traders will try to turn a profit no matter what the market is doing.
How do bearish investors make money?
Bearish investors can make money too. They do this by either trying to predict when the market will change from bearish to bullish and investing at the turning point, or by trading ‘short’. When someone is in a short position, it means they have borrowed and sold an asset that they intend to buy back at a lower price later.
If you found this article interesting then you may be interested in Is Crypto Dead – or an Outstanding Opportunity?
That’s all for now
Iain McClafferty – The Five Year Mortgage
