What Is a Crypto Bull Market? Strategies for Maximizing Gains

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October 31, 2024 12:06 EDT

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A crypto bull market refers to a period of sustained rising cryptocurrency prices and market optimism. Optimism is key to this, encouraging investors to buy more and pushing asset prices ever higher. During the 2021 bull market, Bitcoin rose from $13,000 to more than $69,000 after having risen from a $4,000 low in 2020.

Bull markets can be life-changing in crypto markets, but you have to be invested. It’s also important to invest in the right assets to realize the highest gains. How long does the crypt bull market last? The party might last a few months, or it could continue for a year or longer. In this guide, we’ll discuss crypto bull market strategies and ways to spot entry and exit points to maximize earnings.

Bear vs. Bull Markets in Crypto

We often hear popular cryptocurrency terms, like bull and bear market, and have a general sense of their meaning. In both bull and markets, as they relate to traditional investments, prices move by 20% or more in a broad market index during a two-month period. However, crypto traders often adopt a looser definition. Moves of 20% or more aren’t unusual in crypto markets due to increased volatility for cryptocurrencies. Additionally, the two-month criterion is often ignored.

However, bull markets in crypto show some key characteristics. You’ll see rising prices across most cryptocurrencies, paired with increased investor optimism. The general optimism accompanied by public confidence and rising prices leads to more demand, pushing prices higher. Optimism also encourages investors to hold assets for even higher prices, reducing supply on trading platforms. Further fueling the rally, media hype over rising crypto prices brings sidelined investors and new investors to the market.

Comparing a crypto bull market and a crypto bear market in a crypto context shows them to be nearly exact opposites.

Of note, definitions for bull and bear markets typically refer to a sustained increase or decrease in prices for a major market index. In cryptocurrencies, Bitcoin serves as that index, sometimes paired with Ethereum. Currently, Bitcoin’s market capitalization represents nearly 60% of the crypto market cap, with Ethereum representing more than 13% of the total crypto market value.

Why Do Crypto Bull Markets Happen?

Bull markets in crypto occur for a number of reasons. All markets are cyclical, with periods of rising prices or falling prices. However, crypto has some industry-specific drivers for bull markets, including increased adoption and new investment options that merge traditional financial markets with crypto assets.

Increased institutional investment bodes well for crypto markets, with the most prominent of these being crypto ETFs (exchange-traded funds). In January 2024, the US Securities and Exchange Commission (SEC) approved Bitcoin spot ETFs. These new funds allow everyday investors to invest in Bitcoin without technical knowledge about secure storage. Many believe increased demand through ETFs will usher in the next crypto bull market and credit BTC’s resurgence in 2024 to ETFs.

Since the 2021 crypto bull market, we’ve also seen other major developments, including the launch of Ethereum 2.0, which moved the world’s second-largest crypto to a more energy-efficient consensus method and paved the way for higher throughput on the network. Additionally, the launch of Layer-2 crypto projects for both Ethereum and Bitcoin promises to make these networks more efficient while adding impressive new functionality.

Favorable regulation for crypto markets and global economic factors also affect crypto trading. Low interest rates and increased government spending tend to benefit Bitcoin due to inflation concerns. The chart below shows a strong correlation between the price of Bitcoin and the global money supply (M2).

As more people see Bitcoin as a store of value, many expect this gap on the chart to narrow. Historically, Bitcoin moves the rest of the crypto market performance up, meaning that a Bitcoin bull market creates a crypto bull market.

Prior bull markets in crypto didn’t have a specific catalyst. However, in the months leading up to the market peak in 2021, Ethereum announced plans for Ethereum 2.0, and Bitcoin developers prepared to launch Bitcoin’s Taproot upgrade.

How to Identify if Crypto Is in a Bull Market

Several market dynamics help to identify a bull or bear market in the making. Economic indicators like lower interest rates on rising inflation create tinder for a roaring bull market. However, trading volume and chart action also provide helpful indicators.

Moving Averages

One key indicator to watch is moving averages. Long-term trend indicators like the 50-day and 200-day moving averages can tell a tale when the lines cross on a chart. For example, in the chart below, the 50-day moving average crosses above the 200-day toward the end of the chart trendline. While it’s possible that Bitcoin continues to consolidate at this level, a continued sharp divergence north of the 50-day moving average would signal the market wants to continue higher.

However, trading volume also plays a big role. Bull markets see notably higher trading volume. A chart price drifting up or down on low volume can quickly change direction when more traders enter the market.

Bitcoin Dominance

Many traders also watch Bitcoin dominance, which refers to Bitcoin’s value relative to the entire crypto market. However, this metric can be counterintuitive. As Bitcoin reached its highs in November 2021, Bitcoin dominance fell to its lowest point, with BTC making up less than 40% of the total crypto market. Exuberance had spread to a wider range of cryptocurrencies as the total crypto market soared in value.

2021’s bull market was led by a surge in Bitcoin dominance, which waned as traders found opportunities beyond Bitcoin. Assets like Ethereum, Solana, and Cardano also performed extremely well during this time.

Relative Strength Index (RSI)

The relative strength index (RSI) is one of the easiest ways to identify a crypto bull market. Although each of the three prior bull markets for Bitcoin (2013, 2017, 2021) showed overbought conditions, the market continued buying anyway.

Based on RSI, 2024 may be showing the beginning of a bull market. Bitcoin has already surpassed its 2021 highs. However, other assets that led the 2021 rally, such as Ethereum, still lag behind their 2021 prices.

External Factors

At a total market cap of $2.4 trillion, crypto is no longer a speculative fringe asset. External factors like macroeconomic and global liquidity conditions, regulatory news, and global liquidity all affect crypto markets. Bitcoin’s price trajectory closely follows trends in the global money supply.

Economic indicators, such as a slowing economy, suggest that interest rate cuts from central banks also affect leading cryptocurrencies like Bitcoin. However, this hasn’t always been the case, and this is seen in more recent trading activity. During the early part of the 2022 bear market, the US federal funds rate fell near all-time lows, suggesting inflation. Bitcoin fell in value.

Additionally, governments around the world increased the money supply to stave off the economic effects of the pandemic. Arguably, some of this extra liquidity found its way into crypto markets, helping to boost confidence and fuel the 2021 bull market.

Signs of an Impending Bull Market

Keeping a close eye on the RSI for the long-term chart may be the easiest way to see a bull market in the making. However, several other indicators can help to identify growing bullishness in crypto markets.

The convergence of crypto and traditional markets also offers some clues. Risk assets like cryptocurrency attract capital during periods of economic recovery. Conversely, crypto assets are also among the first to sell off when markets get jittery.

You can see investor sentiment play out in full color using the Fear and Greed Index. This simple-to-read indicator uses a simple gauge ranging from extreme fear to extreme greed from optimistic investors. Under the hood, the index measures various criteria, including social media posts. As a caveat, the Fear and Greed Index can occasionally move into extreme greed (bullishness) without entering a true bull market.

Significant technological advancements in blockchain technology or the adoption of blockchain tech in new use cases make the market bullish. In mid-2024, the tokenized treasury market, which didn’t exist until 2024, reached $1.8 billion in assets.

Historically, crypto bull markets have occurred about every three to four years, lasting from a few months to about a year. Bear markets follow bull markets, but the duration has been longer for bear markets, which have lasted about one year on average. However, the transition between bull and bear markets isn’t always immediate. Although a sharp selloff starts the ball rolling downhill, the selling typically slows down, with some brief reversals and trading opportunities before reaching the bottom.

Based on historical patterns, the next bull run could begin in 2024 or 2025. Notably, the peak of crypto bull runs have all occurred in November or December.

Signs of a Bull Market Losing Steam

Historically, bull markets in crypto last up to a year, but identifying the beginning of the end often proves challenging. However, the market offers clues, one of which is trading volume. Let’s examine Bitcoin during the 2021 bull run. The green and red bars at the bottom of the chart represent trading volume.

Trading volume surged during the first part of the climb, sending BTC from under $10,000 to more than $60,000. However, approaching the $60,000 mark, trading volume waned. Shortly thereafter, Bitcoin lost half its value, falling to $30,000. Although the market recovered and Bitcoin went on to hit a then all-time high of $69,000, it did so on notably lower volume. After reaching a new but unconvincing high, Bitcoin sold off, with the slump lasting more than a year and BTC falling to $15,500.

Corrections are normal in bull markets. Sometimes, the market gets ahead of itself, and profit-taking leads to a larger dip. However, it’s important to evaluate these dips to determine if the market if they are temporary or if they signal the beginning of a bigger downturn.

During the 2021 crypto bull market, three indicators combined suggested it was time to sell by the time the BTC market reached $60,000 a second time. Let’s look at these simple indicators to see what they predict about future price action.

• Volume: Following the first run-up, trading volume for BTC had already fallen considerably. This provided the first clue that market exuberance was beginning to fade.
• RSI: The relative strength index showed a peak during the first run-up but then fell considerably, indicating market weakness.
• MACD: The moving average convergence divergence indicator (MACD) provided a sell signal when BTC reached $60,000 a second time. although the market ultimately went higher, relatively few traders were able to sell at the top.

On a five-year chart, MACD also signaled a sell at about $58,000 on the way back down from the 2021 highs. BTC later drifted lower with brief recoveries, beginning to ascend again after falling to less than $16,000.

A single indicator may not provide enough clarity. However, when combined, trading indicators become powerful tools to identify potential market trend changes. More on indicators in a bit.

How Long Does the Crypto Bull Market Last?

Crypto bull markets can last up to a year. However, approaching the seven-month mark, it pays to watch the chart indicators closely. The 2017 bull market in Bitcoin lasted about eight months.

2013’s bull market was extremely short-lived. Bitcoin surged from $about $60 in June to more than $1,000 in November. However, much of the gain occurred in the last month of the bull run.

• 2017: After falling to the low $200s following the 2013 bull run, Bitcoin began to climb again, with the first notable surge occurring in May. Between May and December, BTC ran from $1,300 to $20,000.

• 2021: In what remains the most famous crypto bull market, Bitcoin increased in value from $10,000 in October 2020 to nearly $70,000 in November 2021. The spectacular rise became part of Bitcoin history and crypto lore. During this same period, Ethereum increased from $344 to nearly $4,900. Previous bull markets saw Bitcoin dominate in regard to gains due to its massive percentage of the crypto market.

The party can’t go on forever; however, crypto regulations can play a role in bull market durations. In May of 2021, China announced a crackdown on Bitcoin mining and crypto trading. While Bitcoin and crypto markets continued to surge, tightening regulations may have suffocated the market’s trading volume by late year.

Other factors that can affect the length and intensity of bull markets include macroeconomic conditions and overall investor confidence and sentiment. Bull markets feed on euphoria, and as that wanes, once-raging markets can falter.

Crypto Bull Market Investment Strategies

HODLing your crypto during the bull run can pay off handsomely, but only if you time your exit well. The best crypto trading strategies center on identifying entry and exit points. However, it’s also important to diversify and limit the use of leverage to preserve your capital. Let’s explore some ways to profit from a bull market in crypto.

Spot a Bull Market Early With Technical Indicators

Several technical indicators, including Bitcoin dominance, moving averages, and RSI, can point to the beginning of a bull run in crypto. These tools can help you identify the run before it gains momentum. Buying early is key to maximizing gains.

• Bitcoin Dominance: The term Bitcoin dominance refers to Bitcoin’s percentage of the total crypto market. In prior bull markets, Bitcoin dominance grew steadily as a prelude to higher prices. As the bull run takes hold, alt season often begins when Bitcoin dominance reaches 60% or higher convincingly. During alt season, other crypto assets attract a bid, sending the entire market higher.
• RSI: Watching the relative strength index offers clues as well. In a bull market, RSI often finds a floor in the 40-50 range and can reach above 90 during peaks. 2021’s bull market saw RSI reach as high as 94.
• Moving Averages: Although a lagging indicator, major moving averages like the 50-day and 200-day can point to longer-term trends, such as the start (or end) of a bull market. The 50-day moving average crossing above the 200-day moving average signals a buy. Crossing at a steeper angle sends a stronger signal.

HODL, But Earn Passive Income

Many investors prefer not to try timing the market but to HODL (Hold On for Dear Life) their cryptocurrency instead. Several strategies, including staking and lending, allow you to hold for future gains while still earning a yield. These strategies let you earn passive income from crypto, although each comes with its own risks.

• Staking: Crypto staking takes on several meanings, although almost all refer to locking tokens in a smart contract. The most common type of staking involves providing tokens to secure a proof-of-stake chain, like Ethereum, Solana, or Cardano. In exchange, stakers earn a yield, often 3% to 5% annually. However, smart contracts may have vulnerabilities, and staking may require a time commitment before you can access your tokens.
• Lending: Both centralized and decentralized platforms offer crypto lending, in which you deposit crypto into a lending pool and earn interest based on your proportional share of the pool. Risks center on contract security for decentralized pools and platform solvency for centralized lending platforms.
• DeFi Protocols: Hundreds, perhaps thousands, of protocols support decentralized finance (DeFi) staking. The structure of these protocols varies, ranging from insurance pools like AAVE to liquid staking for proof-of-stake blockchains. Again, smart contract risk and locking durations remain the primary risks. Tokens locked in smart contracts can’t be sold if the market turns.

If you’ve studied the risks, any of these methods allow you to hold your crypto through the bull market while being paid to wait for potentially higher prices in the future.

Take Profits Regularly Using Limit Orders

Another strategy to navigate the bull market while focusing on safety is to use limit orders to take profits as the market rises. This risk management strategy helps ensure you lock in profits before an unexpected downward move. If needed, and if the market does dip, you may be able to buy in again with some of your profits to increase your position while also keeping some profits.

The most effective way to use this strategy is to create limit orders on an exchange. Limit orders are sell (or buy) orders with a fixed price. These orders can be staggered to sell a portion of your holdings with each order. For example, if you own 1 ETH and want to take profits slowly, you can set up five or ten sell orders, each at a higher price than the last order. This lets you put your profit taking on autopilot.

However, when using limit orders, check the order carefully. Many exchanges, such as Coinbase, use good-till-cancelled (GTC) orders by default. On the other hand, some exchanges use good-till-day (GTD) orders that expire at the end of the trading day.

Diversify Your Portfolio

Earlier, we discussed Bitcoin’s rising market dominance and how it often surges in the lead-up to a bull run. As Bitcoin dominance reaches a peak, alt season typically begins. Capital begins to flow to other cryptocurrencies. A diversified portfolio helps you capture gains on both ends of the market.

Diversification also helps manage risk. If one asset sells off, another might still be enjoying gains. While many investors focus on large-cap cryptos like Bitcoin and Ethereum, a diverse crypto portfolio allocation gives you exposure to smaller-cap coins that may see even larger percentage gains. Do your research first, but consider adding some of the best altcoins to your portfolio mix.

Use Leverage Cautiously

Leverage trading refers to borrowing crypto to make larger trades using your own crypto as collateral. For example, in a 10x leverage trade, you can control $1,000 worth of a crypto asset in a trade using $100 as your margin (collateral). The obvious benefit is that you can multiply your earnings dramatically, 10 times over in the given example.

However, leverage trading is much riskier than spot market trades without leverage. For example, if you buy $100 worth of Bitcoin without leverage, BTC would have to fall to zero to lose your entire investment. By contrast, using 10x leverage to control $1,000 worth of Bitcoin could cause you to lose the entire investment if Bitcoin falls by 10%.

Some crypto leverage trading platforms even offer leverage trading up to 125x for specific assets, such as Bitcoin. A move of less than 1% in the wrong direction would force the exchange to sell your collateral to cover the trade loss. Margin trading can be extremely profitable but also brings considerable risk and much more stress for most investors. If you choose to use margin trading, consider using a lower leverage amount, such as 5% or lower. This approach lets you increase your potential gains while managing risks more responsibly.

Tax-Loss Harvesting in Bull Markets

Market timing isn’t always an exact science, but if you miss your target and incur a loss, there may be tax advantages. Crypto taxes work much like other capital gains taxes in that the IRS allows you to use capital losses to offset capital gains in many cases.

Keep good records of your trading activity, including trading fees. Trading costs increase your cost basis to reduce your tax liability.

When to Exit a Bull Market: Timing Your Exit Strategy

Bull runs in crypto can last a year or longer, but the party always ends, ultimately leading to the bear market part of the cycle. You can consider using limit orders to exit your position gradually and lock in profits on the way up. However, it’s important to watch for signs that the bull market may be ending so you can make decisions regarding the rest of your holdings.

• Declining Volume: Falling trading volume is often the first indicator of a market losing steam.
• Regulatory Changes: Tightening crypto regulations in key countries can also dampen a raging bull market. Stay abreast of industry developments and news that can affect trading volume or trigger a selloff.
• RSI: The relative strength index often peaks on the long-term chart shortly before the decline begins. During the 2021 bull market, BTC’s RSI reached 94 as Bitcoin approached its all-time high for the cycle. The following decline in the RSI signaled a coming reversal for Bitcoin’s price.
• Moving Averages: The 50-day and 200-day moving averages can help identify long-term trend signals. If the 50-day moving average crosses below the 200-day moving average, expect more selling. Many traders use this indicator to identify entry or exit points.

Final Thoughts on Crypto Bull Markets

Technical indicators, such as volume, RSI, and moving averages, can help identify the start of a bull market. However, these indicators can also help you spot a market that may be losing steam. Prior to the bull market run, Bitcoin dominance often rises, with Bitcoin enjoying a larger and larger percentage of the overall crypto market.

Although bull markets see less volatility than bear markets, crypto is among the more volatile markets. It’s important to stay informed and stick to your strategy rather than trade emotionally. By the time a bull market is in full swing, part of the opportunity is already lost. Spend some time learning how to invest in crypto to fully capitalize on the next bull cycle before it starts.

👉 Learn More: How to Invest in Crypto: A Comprehensive Guide for Beginners

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