Know your bulls, whales and bears

‘Bears’, ‘Bulls’, and ‘Whales’ explained

If you’re involved in the traditional stock market – or have some knowledge of it – you’re probably familiar with the terms ‘bull’ and ‘bear’ used when describing markets.

In fact, you may have heard of many different types of trading ‘beasts’ - all of which are used to indicate specific market outlooks and behaviours.

The world of cryptocurrency is, in many ways, radically different to the traditional stock market. However, the terms ‘bull’, ‘bear’ and even ‘whale’ are commonly used by crypto traders and investors alike.

To help you develop from cryptocurrency market beginner to expert, this lesson will focus on the key terms you need to be familiar with in order to understand market sentiment.

1. ‘Bulls’ and ‘bull markets’

In the traditional world of stock trading, a bull market is one defined by optimism. To be ‘bullish’ means to have a positive outlook – and people who are overly optimistic are commonly referred to as ‘bulls’. Depending on your personal outlook, you might see this as a positive label or, quite possibly, as a sign of derision.

In any event, bull traders are typically more optimistic about the direction of market prices. When it comes to the prices themselves in a bull market, you can expect higher highs and higher lows and buying is generally encouraged. A good example of a ‘bull run’ is Bitcoin’s huge surge towards the end of 2017.

2. ‘Bears’ and ‘bear markets’

Contrary to a bull market, a bear market is defined by caution and pessimism. In a bear market, you can expect lower highs and lower lows – a good example is Bitcoin’s downturn at the start of 2018.

A bear market is generally an environment in which people are more likely to sell than buy.

Be careful not to confuse a bear market with a price correction though. The former is a sustained period of downward price trends; while the latter occurs as a measure to,as the name implies, ‘correct’ the price of an overvalued commodity or currency.

3. ‘Whales’

‘Whales’ are most simply described as individuals who hold a significant amount of a certain cryptocurrency. So much so, in fact, that when they buy or sell, they don’t just make a splash in the market – they make waves! These waves can be large enough to have a major impact on the whole market. An example of a whale could be someone like Vitalik Buterin, who naturally holds a lot of ether.

Thanks to their digital wealth, and in part due to the unregulated nature of the markets, a whale has the power to move prices in their preferred direction. Many cryptocurrency traders pay close attention to whales (whale-watching, anyone?) and watch how, when and where they trade. This way, they can go along for the ride and profit alongside the whale – or, alternatively, simply avoid going against y the whale, as that would result in losses.

It’s not all that easy or straightforward to spot a whale. You need to look out for abnormal changes in prices and volatility during periods which are expected to be quiet and stable.

Why do these terms matter?

If you’re looking to become a successful cryptocurrency trader, you need to be able to react to bear and bull markets and, if you can, align your trading activity with those of whales.

It’s not the terms themselves that matter - it’s about understanding different crypto markets and the various players within them. Knowing what a bull or bear market means for prices could be the difference between making significant profits or significant losses.

It’s also important that you grow familiar with the terms commonly used by the crypto community. This will allow you to keep up with more in-depth analysis of behavioural trends and price fluctuations. You could say that if you can tell a ‘bear’ from a ‘bull’ and a ‘minnow’ from a ‘whale’, you’re one step closer ‘to the moon’.

We will be covering more crypto slang in a later lesson.

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Which term indicates optimistic market activity?