3 unmistakable vital signs of a crypto bull run
Cryptocurrencies in general aren’t yet general-use currencies, or at least not for most people. While the account of investors who own and trade them grows every day, they’re still mainly used as speculative currencies and fast money moves.
The direct result of this is that the crypto market behaves more closely to the stock market than the currency flip– with regular, often long, bull and bear runs that can make or destroy fortunes. For traders, this means that they need to keep an eye on the prices of cryptocurrencies and also for signs that a token might be entering a bear or a bull run.
How to spot a bull run
The earlier a trader can identify a bull run, the better. Being able to tell when a bull market starts means having a headstart on profitable investments, thus maximizing profit. Luckily for many traders, decades of stock market trading and observation have armed us to know when a cryptocurrency is entering a bullish market. Several of the signs for this are:
A sharp drop followed by immediate recovery
The first step in learning how to make money in a crypto bull run is to know the vital signs. Crypto prices, just as stock prices, sometimes see sudden variations. These sudden price changes are often caused by external factors or unexpected news that lead people to suddenly lose trust in the cryptocurrency. The disenchanted then dump their crypto immediately, causing an offer overflow against a steady or dwindling demand that brings prices down.
The thing is, the despair that leads crypto investors to immediately sell all they have isn’t necessarily shared by everyone else. Spurred by the sudden price drop, other traders might see opportunity and decide to buy – turning a sudden, sharp decline into a steep rise.
When this happens, a bull run is likely – as quite often prices recover in the short-term to at least the same levels they had before the crash. In many cases, the post-crash prices can even go higher than pre-crash threshold, leading to even higher profits for those who recognized the opportunity.
Unstable prices can breed bull markets
A more common type of bull run is often dictated by short to mid-term pricing data: A currency whose price goes up, then down, then up again might be entering a bull market.
This follows the same logic as above, to some degree: Before prices start to go high, they first go low, although not necessarily as suddenly as in the previous example. Chart analysts usually refer to “M patterns” and “W patterns” to signal expected behavior in a cryptocurrency.
An M pattern is a bad one – it’s the pattern drawn in the graph when a price rises, then lowers, then rises… only to then lower again and continue its way down. An M pattern is a sign of a likely, but not assured, bear run.
For bull runs, it’s the W pattern you want to see: A downward trend switches direction, the price hike is short-lived before it starts going down again, and then before long it goes up – that’s a sign of a likely bull market. The W is created by market forces (offer/demand and prices) stabilizing over a period of time, and then the proper bull market begins.
Do note that an M pattern can give way to a W pattern and otherwise, so it’s always good to keep an eye out on market behavior – as these patterns don’t guarantee a bull or bear market. They’re just predictors.
Large gaps in the order book
All cryptocurrencies – and stocks, and valuables – are traded via order books. Sell orders are placed by people who own crypto and want to sell it at a certain price, while buy orders are placed by people with money, hoping somebody will sell them crypto at specific prices too.
There’s always a gap between buy and sell orders, which is usually where offer and demand meet, giving place to the standardized price for a cryptocurrency at any given moment.
The gap, however, is usually very small. When this gap looms large, it can be a sign of an incoming bull run.
Essentially, a large gap between the prices of sell and buy orders means there’s a hole in the market – for example, if the lowest sell order sits at $10,000 and the highest buy order sits at $9,000, then it’s easy to tell the market is due for a correction somewhere in between. This correction often comes in the form of a bull run.
The bull runs caused by large gaps can be short-lived, but they can be extremely valuable for those who learn to spot said patterns, as they can then make decent to large ROIs over a short time.
The above are only a few of the more obvious indicators of incoming bull runs for cryptocurrencies. There are more, and there are some that can only be predicted by looking outside the market: External events and news.
It’s not uncommon for a cryptocurrency to have its price go up when large developments are announced – but the detail here is, those large developments often have been on the cards. Just as well, an external event that drops the price of a token due to, for example, political reasons, could well drive down the prices of others in the short run.
In truth, the best way to predict the market falls somewhere in between the charts and the news. Charts tell pricing story independent from the market itself. News tell you what’s going on, but not how prices are acting at that moment. Know what’s going on in both sides, however, and you might be able to predict the future of the market.