Causes of Bitcoin’s Bull and Bear Markets
One of the main things that almost everyone will tell you about Bitcoin is that its price is highly volatile. And this is true. Its price or value keeps changing by the minute. News that the value of one Bitcoin has surged or dropped by margins of up to 30% shouldn’t shock you. Currently, Bitcoin’s price is about $19,900. And this marks a significant drop from its price about 11 months ago when it reached its all-time high of above $68,000 in November 2021.
Bitcoin prices can rise or fall at any moment. When the Bitcoin market experiences an extended upward movement, people call it Bitcoin’s bull market. One of the main characteristics of the bull market is an increase in Bitcoin prices. Other characteristics may include increased demand and enhanced investor confidence. Start your trading career by using the most recommended trading platform such as bitcoin up
On the contrary, when the Bitcoin market experiences an extended downward movement, then this can be referred to as Bitcoin’s bear market. Apart from falling prices, low investor confidence and low demand characterize the bear market. Activities in the bear market also tend to be down.
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Causes of Bull Market
Various factors working single-handedly or together can cause a Bitcoin bull market. One of the leading causes is growing investor confidence. When investors gain more confidence in Bitcoin, they tend to buy more. And this pushes demand high despite the supply not increasing at the same rate.
An increase in institutional investment can also cause Bitcoin’s bull market. Institutions tend to have higher investment capacity, and when they invest in Bitcoin, it creates the impression that the asset is good for investment. So, many investors will rush to buy Bitcoin, pushing the price higher.
Some unique events can also cause a Bitcoin bull market. For example, the COVID-19 pandemic influenced significant growth in the crypto market. Since government lockdowns and other COVID-19 limitations prevented people from engaging in their everyday lifestyles, they had to turn to cryptocurrencies like Bitcoin.
Finally, crypto celebrities can also cause Bitcoin bull markets. Famous crypto celebrities start or increase their investment in Bitcoin, which could cause many people to follow suit. Paris Hilton and DJ Khaleed drove bull runs in the Bitcoin market in 2017.
Causes of Bear Market
Like in the bull market, investors are the leading causes of a Bitcoin bear market. When investor confidence drops, this could decrease activity in the Bitcoin market. And this could also result in declining Bitcoin prices.
A Bitcoin bear market could also emerge from declining Bitcoin prices. When prices start dropping, investors may lose confidence in ever-increasing prices soon. Those who have Bitcoin will want to sell to avoid making more losses. However, the low confidence level will be low demand for Bitcoin.
Various macroeconomic factors could also cause Bitcoin bear markets. Wars like the ongoing conflict in Ukraine have caused Bitcoin prices to drop. Geopolitics could also have similar effects.
Final Thought
A variety of factors could cause Bitcoin’s bull and bear markets. Since Bitcoin is still emerging, we cannot know or understand all causal factors now. Nevertheless, it is essential to keep a close eye on the Bitcoin market to understand the bull and bear market cycles better.
