When talking about markets, both mainstream and crypto, “bullish” and “bearish” often make headlines and conversations, although such usage typically depends on financial knowledge and experience. What do the two terms mean?
Bullish and bearish refer to the market sentiment seen collectively or expressed by a person. When someone is optimistic, it means that they expect an asset or asset class to rise in price. Conversely, bearish refers to negative price expectations. Someone holding a bullish bias is sometimes referred to as a “bull” or “bull” when a group or faction in the market is bullish. “Bears” therefore anticipate falling assets.
Why use bulls and bears as preferred animals for such terminology? The answer may lie in the way the two animals attack their prey. Bulls attack upwards and drive their horns through their target. Bears, on the other hand, start high and attack down with their weight and arms.
However, this explanation of the roots of the terminology is only one possibility, according to Investopedia. “The actual origins of these terms are unclear.” The vocabulary can also come from bearskin deals long ago.
The Oxford Learner’s Dictionary describes bullish as: “Looking confidently and positively about the future” or “causing or related to an increase in the stock price”. Bearish means: “Show or expect a decline in share prices”.
Do you feel like being a bear?
Bullish and bearish desires depend on a number of factors. In general, traders don’t care if a market or asset is bullish or bearish as long as they can trade both ways (called long and short positions). Traders often get in and out of positions more often than investors and use shorter time horizons for their games.
Rather than wishing to be bullish over bearish or vice versa, traders can be more concerned with whether they are correct with their bullish or bearish view and benefit from trades as long as they determine exactly which direction a particular asset is going in based on the strategies used . However, the strategies, talents, or tendencies of some traders may favor one market condition over another.
On the other hand, investors generally buy positions and hold them for longer periods of time in order to benefit from the rise in prices, so logically they want bullish markets. An investor can take a long-term short position or sell an asset if they have a pessimistic view of an asset, although the maximum anyone (in pretty much any case) can make is 100% profit when they’re at the very top sells short and rides the fortune to zero. On the other hand, assets can rise in price practically indefinitely and offer potential gains of more than 100%.
When dialing into crypto specifically, why might an investor or trader wish Bitcoin (BTC) or a particular altcoin to go down in price even if they are overall bullish about the crypto industry? One reason could be their position. If a trader is pessimistic on BTC – and anticipates falling prices to come – they may take a short trade on BTC and therefore logically want the price to go down as they would benefit from the decline in the asset.
Traders can even be bearish in the short term and bullish in the long term, or vice versa. For example, you can expect the price of Bitcoin to decline over a period of days or weeks, but ultimately to rise and return to an upward trend lasting several months.
Investors or traders may also have a bearish and long-term bullish view in the short term and may want lower prices in the short term in order to buy certain assets at relatively cheaper prices. Conversely, a market participant can have a short-term bullish view with a long-term bearish outlook. They may think prices will go up due to hype or other factors, so they can buy or go long in the short term while ultimately expecting to eventually sell their positions believing the market is a bubble or something like that.
It is important to note that the definition of short and long term in markets can be subjective.
A look at what could create a bullish or bearish bias
Any person’s bullish or bearish view is likely to be based on a variety of components such as charts, news, and common knowledge. A market participant could believe, based on certain chart conditions or patterns, that Bitcoin or an Altcoin is bearish for a certain period of time.
You can also view assets pessimistically over the longer term after negative announcements, such as a specific government action. Due to an upcoming event, such as the launch of Bitcoin futures trading on the Chicago Mercantile Exchange in 2017.
People can also have a general bearish or bullish view of an asset as a whole. MicroStrategy CEO Michael Saylor sees Bitcoin as a new way to store value. Gold proponent Peter Schiff, on the other hand, sees Bitcoin as a bubble.
Hence, many factors play a role in the upward and downward movement. Time frames, perspectives, opinions, and events can all affect a person’s prospects for an asset or asset class. Ultimately, each individual has to come to their own conclusion about what they think.