What is Bull Run ? Understand the rowing of the financial markets and cryptocurrencies
In the world of investment, especially that of cryptocurrencies, the term " bull run " often returns, evoking moments when the market climbs dramatically. But what bull run ? This article takes you to discover the bull run S, their impact on the markets and strategies to take advantage of them. Whether you are a beginner or experienced in the investment, understanding the cycle dynamics to predict a bull run is crucial in investment.
Table of contents
Definition of a Bull Run
What is bull run ? A bull run is a period during which the prices of assets rise in a sustained manner over an extended period. This phenomenon, generally accompanied by an increasing optimism of investors, is opposed to the Bear Market , a period of prolonged market. In a context of bull run , confidence is high, investors are inclined to buy, anticipating future gains.
Understand market cycles
The financial markets, including cryptocurrencies, follow cycles marked by periods of expansion and contraction. The charter of "Wall St. Cheat Sheet" illustrates these cycles and the emotions that accompany them: from hope to capitulation, and finally to denial and depression. These cycles influence price dynamics and offer benchmarks to anticipate market trends.
The phases of the market cycle
Hitsorically, each market cycle has been divided into several phases:
- Hope and optimism : the first signs of recovery after a period of decline. Investors are starting to believe in the possibility of future gains.
- Excitement and euphoria : it is here that the bull run reaches its peak. Prices go up quickly and everyone wants to enter the market.
- Comlacement : investors think that gains will continue without interruption.
- Fear, panic, and capitulation : when prices start to lower, doubt settles, and many sell to limit losses.
These different phases are essential to understand the ups and downs. Investing asks to know in which phase we are in order to be able to fully benefit from a bull run .
Bull Run in the context of cryptocurrencies
Cryptocurrencies are particularly subject to bull run S, largely because the market is still young and constantly evolving. New people discover this ecosystem regularly, providing new liquidity at each cycle.
This influx of capital, due to the growing attraction for these innovative technologies, contributes to fuel the periods of rapid price increase. Unlike traditional financial markets, cryptos attract many investors looking for fast earnings, which further amplifies price movements.
For example, certain recent projects, especially in decentralized finance ( DEFI ) or NFTS , can sometimes emerge quickly and trigger bull run S.
However, identifying these promising projects requires attentive monitoring and good knowledge of the market: they remain rare and subject to high volatility. The lower the market capitalization of cryptocurrency, the higher the risk.
Why does a Bull Run occur?
Several factors can trigger a bull run :
- Technological innovation : The launch of new projects or technologies attracts attention.
- Increasing adoption : when large companies or governments show an interest in blockchain, this can generate a craze.
- Economic context : favorable monetary policies or the presidential election of a particularly professional candidate can promote the confidence of investors and lead to a bull run .
In cryptos, the Halving (reduction of the mining reward for Bitcoin) has historically always been followed by the appearance of a bull run several months later.
The importance of halving in the cycle of cryptos
Halving is an event specific to Bitcoin, occurring approximately every four years. By reducing the emission of new bitcoins, Halving limits the supply, which can cause an increase in price if demand remains high. Historically, the Halving preceded bull runS, making this event particularly followed by investors.
Risks and opportunities during a Bull Run
A bull run is by definition very attractive, but it is not without risks. Increased volatility means that prices can climb quickly, but also descend suddenly, this is called the Bear Market . However, for well -prepared investors, these moments can offer significant gains opportunities. With a good knowledge of the market, you can take advantage of the rise in prices while limiting its exposure to possible falls.
Fear of Missing Out (FOMO) and Bull Run
The fear of missing out Or afraid of missing an opportunity (or FOMO ) is particularly present during the bull run S. Seeing prices go up can encourage you to buy for fear of missing out important gains, even if prices are already very high. This fear of missing is one of the motor mechanisms of the bull run S. This emotion, although natural, can push to make precipitated decisions. It is crucial to keep your cool and remember that the bull run S are not endless and are followed by corrections.
Bull Run and Total Value Locked (TVL)
In the DEFI, the Total Value Locked ( TVL ) represents the sum of the assets immobilized in the protocols. During a bull run , TVL tends to increase, because more investors place their assets in these protocols. TVL TVL commitment of investors.
Advice to invest in Bull Run
Investing during a bull run requires a disciplined approach. Here are some examples strategies:
- DCA (Dollar-Cost Averaging) : Investing fixed amounts at regular intervals to smooth price variations.
- Take profits gradually : do not hesitate to secure part of the gains by gradually selling, we call it the DCA Out .
- Set sales levels : for each of your positions, you can set 3 sales levels with different percentages of the position of the position at each level. You can estimate the levels according to the bull run and the conviction you have in the invested project.
- Diversification : do not bet everything on a single crypto, but distribute investments to reduce risks.
These strategies can help maximize gains while limiting the risks associated with sudden corrections.
3 -level sales strategy
Here is an example of Bitcoin sales strategy in three levels, making it possible to take profits gradually at predefined price levels, while retaining part of your position to take advantage of any subsequent increases.
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First landing: € 93,000
- Objective: sell 25 % of your total bitcoin position.
- Suppose you have 1 BTC, so you sell 0.25 BTC when the price reaches € 93,000.
- This first sale allows you to recover part of your initial investment and take advantage, while keeping a good part of your position in the event of continuation of the increase.
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Second level: € 114,000
- Objective: to sell 50 % of what you have left after the first level.
- After the first sale, you have 0.75 BTC. You will therefore sell 0.375 BTC at this level.
- This step allows you to secure additional gains while still having a share of your investment to take advantage of future increases.
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Third level: € 145,000
- Objective: sell 100 % of the remaining position.
- After the first two sales, you have 0.375 BTC. You sell this remaining part when Bitcoin reaches € 145,000.
- This last sale allows you to make the final gains on your position.
Advantages of this strategy
- Progressive security of profits throughout the climb.
- Exposure reduced to risks in the event of a sudden correction after each sales level.
- Flexibility to adjust the strategy if the market evolves differently from forecasts.
This type of strategy is particularly useful in a volatile market like that of cryptocurrencies, where rapid increases can be followed by important corrections.
Conclusion and preparation for the next Bull Run
Understanding what a bull run is and how it fits into market cycles is essential for any investor in cryptocurrencies. By learning to recognize the warning signs and by adopting cautious investment strategies, it is possible to take advantage of the increases while limiting losses. Stay informed, prepare yourself, and anticipate the next bull run !
FAQ on the Bull RunS
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What is bull run ?
- A bull run is an extended period of increase in prices on the market, fueled by the optimism of investors.
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How does Halving influence the bull runS?
- Halving reduces the supply of bitcoins, which, combined with an increase in demand, has historically always been followed by a bull run several months later.
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What are the risks of a bull run ?
- bull runS are often followed by corrections, which causes losses for investors who buy at the top.
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How to avoid the FOMO during a bull run ?
- By following a disciplined investment strategy, such as the DCA, and by diversifying its portfolio.
By clicking on the fat words, discover our articles on the FOMO , the Total Value Locked ( TVL ) and Halving to deepen your understanding of the crypto ecosystem. These key concepts will allow you to sail more serenely in the world of cryptocurrencies and to acquire better knowledge of the market.
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Yohan Uzzan
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
