Bull market vs bear market: understanding stock and crypto cycles
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Where the bull and the bear come from, how to recognise each market phase, and what the history of the S&P 500 and Bitcoin teaches us about cycles.
- Common convention: bear market = 20% fall from a peak; bull market = 20% rise from a trough.
- Bull markets have historically lasted much longer than bear markets.
- Crypto cycles are far more violent: drawdowns of 75–85%.
- Effective strategies differ by phase: adapt your exposure.
“Bull market” and “bear market” are among the most used expressions in finance. The bull attacks by thrusting its horns upward: it stands for rising prices. The bear swipes downward with its paws: it stands for falling prices. Beyond the imagery, these two market regimes follow very different dynamics that any investor or trader needs to recognise.
Definitions
- Bear market: a fall of at least 20% from the last peak, on an index such as the S&P 500.
- Bull market: a rise of at least 20% from the last trough, usually with new highs.
- Correction: a 10–20% decline. Frequent, and a normal part of a bull market.
These thresholds are press and analyst conventions, not laws. Their merit is that they make historical comparisons possible.
What stock market history shows
In the US market, bull phases have historically lasted several years, while bear phases are usually measured in months. A few landmark S&P 500 episodes:
| Episode | Period | Peak-to-trough decline (≈) |
|---|---|---|
| Dot-com bust | 2000 – 2002 | −49% |
| Global financial crisis | Oct 2007 – Mar 2009 | −57% |
| Covid crash | Feb – Mar 2020 | −34% in just over a month |
| Inflation and rate hikes | Jan – Oct 2022 | −25% |
The 2020 crash makes an important point: a bear market can be very short. The index was back at its previous peak by August 2020, about five months after the low. After 2000 and 2007, by contrast, it took years.
Crypto cycles
Crypto amplifies everything. Bitcoin has gone through several declines of more than 75%:
- from December 2017 (close to $20,000) to December 2018 (around $3,200): roughly −84%;
- from November 2021 (around $69,000) to November 2022 (around $15,500): roughly −77%.
These cycles were long linked to the “halving”, the four-yearly cut in miners’ rewards, but spot ETFs and institutional investors have made the pattern less mechanical. Altcoins usually fall even harder than Bitcoin in bear phases.
The four phases of a cycle
- Accumulation: after a heavy decline, price moves sideways, volume is low and pessimism dominates. Patient buyers build positions.
- Uptrend: higher highs and higher lows, rising volume, news turning positive.
- Distribution: price stalls near the highs, volatility rises, euphoria reaches the general public. Informed players gradually sell.
- Downtrend: lower lows and lower highs, sharp but brief rallies (“bull traps”), and a final capitulation on extreme volume.
In a bear market, rallies are often the most violent: short sellers rush to cover. A 10% rise in a few days does not mean the trend has changed.
How to tell which regime you are in
- Structure: on the weekly chart, is price making higher highs or lower lows?
- Long moving averages: price holding above its 200-day moving average is a simple bull-regime clue.
- Reaction to news: in a bull market bad news is quickly forgotten; in a bear market good news no longer lifts price.
- Order flow: on breakouts, do aggressive buyers follow through? Delta and value-area migration give a fine read of that conviction.
Adapting your strategy
In a bull market, buying pullbacks to support or value works well; shorting is risky. In a bear market, caution rules: smaller sizes, shorter targets and close attention to risk rules. In sideways phases, mean-reversion strategies (buy the bottom of the range, sell the top) regain the edge.
The simulator supports both long and short positions: a chance to check, on your own statistics, whether you do better following the trend or fading it.
Historical figures are rounded and indicative.
Educational content only — not investment advice. Trading involves the risk of losing capital.