Bull and Bear Markets: Implications for Bitcoin and Cryptocurrency

In the rapidly evolving realm of cryptocurrency, wealth can be gained or lost within a single day. A tweet or regulatory change may cause prices to skyrocket, while sudden market disruptions like trade wars can erase billions in mere moments. This unpredictability is embodied in two primary concepts that characterize cryptocurrency market cycles: bull and bear markets.

Grasping these cycles is essential—not just for making informed buying or selling decisions, but for ensuring one’s financial survival. Although the distinctions between bull and bear markets might seem straightforward, they are intricately complex. In a bull market, optimism and risk propensity thrive, leading to price increases, while a bear market incites fear, selling pressure, and tests the fortitude of investors.

This article aims to clarify what characterizes these market phenomena and their influence on the cryptocurrency landscape.

Understanding Bull and Bear Markets

In traditional stock markets, a bull market is typically defined as a sustained period of increasing stock prices, usually lasting several months or years and featuring gains of 20% or more. While there are key differences, bull and bear markets in cryptocurrency operate similarly to those in traditional finance. However, crypto cycles are further exacerbated by:

• Significant volatility
• Constant 24/7 trading
• Decreased liquidity
• The lack of circuit breakers to mitigate rapid price fluctuations

Investors in cryptocurrency utilize technical analysis, macroeconomic factors, and on-chain data to identify trends and adeptly navigate market cycles.

“Standard technical analysis tools such as moving averages, Relative Strength Index, and Bollinger Bands can help signal cyclical changes, alongside correlated markets like NASDAQ and tech stocks,” stated Mike Marshall, head of research at Amberdata, in an interview with Decrypt. “Moreover, macro elements like Federal Reserve policies, inflation, and international events heavily influence crypto cycles.”

On January 20, 2025, Bitcoin achieved a record high of $108,786, driven by expectations of a more favorable regulatory environment in the United States under newly re-elected President Donald Trump, who had promised to establish a Strategic Bitcoin Reserve.

Some analysts speculated that this indicative momentum marked a bull market, with a few even referring to it as a ‘supercycle’—a lengthy period of economic growth fueled by persistent demand and positive investor sentiment. Nonetheless, this perspective was countered when Bitcoin plummeted over 31% to almost $73,000 within two months.

“It seemed as though everyone projected that the upcoming Trump administration would deliver a substantial boost to crypto regulations,” remarked Alice Liu, Head of Research at CoinMarketCap, during a conversation with Decrypt at ETH Denver. “Yet, we haven’t exactly witnessed that unfold as anticipated.”

However, Liu noted that this dip in Bitcoin’s price did not automatically signify the onset of a bear market.

“This is a technical pullback rather than a fundamental shift. The liquidity remains strong,” she explained.

Liquidity—the ease with which assets can be sold or acquired without major price shifts—is crucial for differentiating between bull and bear markets. High liquidity signifies a market with smooth transactions and minimal price fluctuations, attributable to a large pool of active buyers and sellers. In bear markets, liquidity tends to diminish as trading activity wanes, intensifying price volatility.

“Even in response to the market shock, we observed a notable uptick in trade volume, averaging around $150 million to $160 million daily,” Liu noted. “And even now, with conditions stabilizing a bit, healthy trading volumes continue to flow through the market.”

Indicators of a Crypto Bull Market

• 📈 Continued price growth: Significant cryptocurrencies like Bitcoin, Ethereum, and Solana register a steady upward trajectory over weeks and months.
• 💸 Increased trading activity and investor engagement: Retail and institutional investors ramping up buying activity reflect strong market sentiment.
• 🤑 Optimistic market atmosphere: Positivity permeates social media, mainstream coverage, and analyst forecasts, often spurring FOMO-driven investments.
• ⛹️ Breakthroughs beyond critical resistance levels: When Bitcoin and other significant assets exceed previous all-time highs, it frequently catalyzes further bullish momentum.
• 😎 Expansion within crypto sectors: Growing activity in DeFi, NFTs, and blockchain gaming implies greater adoption and investment in this domain.

Determining the onset of a Bitcoin bull market is not always clear-cut, as various analysts utilize different metrics to identify its initiation. Some contend it begins when prices rebound from significant declines, while others posit that it becomes evident only once prior all-time highs are surpassed.

“From a technical standpoint, one might argue that a bull market commences with capitulation as prices begin to rise, but most people only recognize a bull market in Bitcoin once the previous all-time high is reached until the bubble bursts about a year later,” Michael Terpin, founder and CEO of Transform Ventures, shared with Decrypt.

Capitulation occurs when an investor, often spurred by fear or anxiety, decides to abandon attempts to recover losses and sells their assets. This usually follows a prolonged downturn in the market, triggered by a significant event, like the collapse of FTX in November 2022.

Indicators of a Crypto Bear Market

• 📉 Prolonged price drops: Major cryptocurrencies face extended downward movements, frequently declining by 20% or more from recent peaks.
• 🛌 Decreased trading activity and investor disengagement: A slowdown in buying behavior, with many investors choosing to sell off or remain inactive.
• 😬 Unfavorable market outlook: An atmosphere of widespread fear, uncertainty, and doubt—referred to as “FUD”—takes over news and social media channels.
• 🎢 Inability to surpass resistance levels: Bitcoin and other assets fail to recover, repeatedly unable to breach critical price resistance levels.
• 💤 Reduction in crypto engagement: Diminished interest in DeFi, NFTs, and blockchain initiatives, coupled with fewer on-chain transactions and decreased network activity.

Investors who maintain their cryptocurrency holdings, despite being in a bear market and facing pressure to sell, are said to possess “diamond hands.”

On-chain Metrics for Market Cycles

• Market Value to Realized Value (MVRV) ratio: Compares market capitalization to realized market capitalization. A high ratio hints at potential corrections, while a low ratio suggests undervaluation.
• Spent Output Profit Ratio (SOPR): Evaluates profit or loss on moved coins. A value above one indicates profit-taking (bullish), while a value below one reflects selling at a loss (bearish).
• Puell Multiple: Assesses miner revenue in relation to historical averages. High values correspond to market peaks, while low values suggest miner capitulation and potential bottoming.
• Hold On for Dear Life (HODL) waves: Examines how long coins are held. An increase in long-term holdings often indicates bear markets, while decreases suggest distribution during bull markets.

Not all financial analysts concur that a 20% shift should be regarded as the standard for determining whether a market is bullish or bearish.

“I believe the average 20% threshold typically cited to define bull and bear markets in traditional finance may not be applicable to crypto, given the broader price changes in the latter and the 24/7 trading that makes it more reactive to global occurrences,” stated David Duong, Head of Institutional Research at Coinbase, in an interview with Decrypt.

Duong elaborated that crypto often serves as a proxy when traditional markets are inactive, intensifying the response to crypto prices.

“I would prefer metrics such as the 200-day moving average, along with assessing how sustainable a given move—upward or downward—actually is,” he added. “For instance, the duration of the movement should determine whether a market is deemed bullish or bearish.”

While crypto markets exhibit certain similarities with traditional finance, they possess unique characteristics—like heightened volatility, greater sensitivity to hype, and regulatory shifts that differentiate them.

“Regarding cryptocurrency-specific technical indicators, my preference leans towards the Market Value to Realized Value ratio or the MVRV z-score to assess market dynamics,” concluded Duong.

Market Sentiment and Trends

Investor sentiment significantly influences market cycles, with various indicators providing insights into overarching trends. Tools like the CBOE Volatility Index (VIX), the Put/Call Ratio, and the American Association of Individual Investors (AAII) Sentiment Survey are utilized to measure investor confidence and risk tolerance.

A popular metric, the Fear and Greed Index, aggregates several market factors to determine if investors are feeling cautious or enthusiastic. The Fear and Greed Index ranges from 0 to 100, where lower values suggest fear, indicating bearish or cautious sentiment, while higher values indicate greed, signaling optimism or bullish behavior.

As of March 30, 2025, the Crypto Fear and Greed Index was at 32 (Fear), a rise from 17 (Extreme Fear) earlier that month. While these indices may not forecast price changes, they often reflect wider shifts in investor mentality.

“Investors often turn to sentiment as a crucial indicator to evaluate whether markets are approaching a peak or low point,” remarked Joe Vezzani, CEO and co-founder of crypto sentiment aggregator LunarCrush, in an interview with Decrypt. “The present crypto market sentiment has reached its lowest level since August 2024, during a period of heightened volatility related to the unwinding of the yen carry trade.”

Jacob King, a financial analyst and founder and CEO of WhaleWire, asserts that market sentiment also hinges on the credibility of the data.

“Indicators do exist—if you have faith in the data, which is always subject to doubt,” King noted during an interview with Decrypt. “Bitcoin dropping below the 200-day moving average is a significant warning signal. When bullish trends falter at that threshold, the overall market structure weakens, leading to accelerated declines.”

Market Cycles and Long-Term Investment Strategies

Markets naturally experience cycles of growth and decline. While no strategy guarantees success, those who adopt a long-term, thoroughly researched approach are generally better equipped to navigate financial uncertainties.

“It’s crucial to understand that the factors defining a bullish market in crypto today extend beyond mere price—they include utility, the maturation of infrastructure, and institutional engagement,” stated Mike Cahill, CEO of Douro Labs, in an interview with Decrypt. “Ultimately, the key indicators include accelerated transaction volumes, fee growth, stablecoin velocity, and on-chain capital formation. That’s when you can be sure the next wave is substantive.”