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Bull market vs. Bear market: What are the differences?

You may have heard a lot about investors feeling "bullish" or "bearish" during times of significant economic fluctuation, but not knowing what they mean or how they are different in nature. These terms typically refer to how optimistic or pessimistic investors feel about the stock market. In this article, we will walk you through all the differences between a bull market vs. a bear market.

Bull market vs. Bear market: What are the differences?
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Investor’s reactions to economic upswings or downswings by either holding on to their assets or selling them as soon as they can, depends on which course of action they believe would provide the best profits for them. Either way, the effect of bullish and bearish markets on the decision of investors is undeniable, making it vital for them to gain enough information about the two notions. Here is everything you need to know about a bearish and bullish market. 

What is a bear market?

A bear market defines a situation when the market prices are declining, at least 20% over a two-month period and market sentiment is generally not very optimistic. Bear markets are usually caused by a decline in the market as a result of geopolitical risk or market bubbles exploding. 

In times like this, usually investors sell their investments in order to make up for their losses, which results in a seller’s market. Bear market time span differs based on several factors. A bear market can last for one week to several years with the longest bear market lasting for 783 days.

What is a bull market?

On the other hand, a bull market happens when the market prices are rising, and the index sees a 20% increase over at least a two-month period. The overall market sentiment is optimistic during a bear market and investors tend to keep their money in the market or invest more of their fund in hope for additional profit after the rising of stock prices. 

Bull markets are typically long lasting compared to  bear markets, with the average bull market lasting for 3.8 years. 

🟧Also read: Fear and Greed Index in crypto market

Bull market vs. Bear market

Different economic indices, such as the cost of commodities, the unemployment rate, interest rates, and more, are affected differently by bear and bull markets. Making better accurate judgments as an investor can be improved by being aware of the key distinctions between these two market stages. Here are some of the main differences between the two: 

Supply and demand

In a bull market, stock prices rise while falling in a bear market. Even during minor market declines, the stock market continually increases in value when the outlook is bullish. Under bearish market conditions, stocks may decline in value or remain stable at low prices. The same notion affects the supply and demand of the market. While in a bullish market the demand increases,  in a bearish market it declines and so does the supply. 

Investor sentiment

Investor sentiment, which defines investors' general sentiments regarding the current state of the stock market, may provide a large amount of data about how the market is doing and where it might be heading. In a bullish market, investors could be more inclined to purchase, but in a bearish one, they might be more inclined to sell and put their money into low-risk assets.

Changes in GDP

Bear markets typically foreshadow a downturn in the economy, which might reduce consumer spending and cut GDP. Companies often make more income in a bull market, and as the economy expands, people are more likely to spend money.

Unemployment rate change 

In contrast to growing unemployment rates in bear markets, declining unemployment rates are compatible with bull markets. Businesses grow and hire more often during bull markets, however during bear markets, they can be obliged to reduce their staff numbers. As fewer individuals are receiving income, fewer firms are making as much money, which tends to extend bear markets.

How to invest in a bull market or bear market? 

The way you make financial decisions varies substantially depending on the numerous distinctions between bull and bear markets. In a bull market, when there is greater potential for larger returns, having a bigger stock allocation is ideal. Buying stocks early and selling them before they reach their peak is one strategy to profit from a bull market's rising value. Investing in shares during a bear market, when there is a greater risk of loss, should be done with extreme caution because you are likely to first lose money. You may want to put your money into fixed-income products to prepare for a downturn market.

Either way, the best way to remain safe and sound during a bullish or bearish market is having a fixed trading strategy. This way, you won’t be affected by temporary sentiments or momentary emotions, while knowing that a fixed amount of profit will always come to you at the end of the year.

Bottom line

It's a good idea to spend some time researching the market before making an investment decision because both bull and bear markets will have a significant impact on your finances. Keep in mind that the stock market has consistently produced good returns over the long run.

In either of the above situations, it is important to remain safe and sound, having chosen a reliable and secure online exchange for your trading and also finding the best place to hold and store your funds in case you did not want to keep on trading for a while.

PayPax is an all-in-one payment solution and reliable platform for you to be able to easily trade thousands of famous and popular crypto assets and also hold your funds in a secure internal wallet, in case you were planning to stay out of the ring for a while. 

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