You've seen it on Twitter. You've seen it in the news headlines. "The Bitcoin BEAR market is coming."

So... What exactly does that mean?

The terms "bull" and "bear" are used to describe market/economic conditions and provide investors with a general trend of whether the market is appreciating or depreciating in value. Bull markets occur when market conditions are favorable and value is generally increasing, while bear markets occur when market conditions are less favorable and value is generally decreasing. These terms are thought to originate from the fighting styles of these two animals: bulls thrust their horns upwards at their opponent, while bears will swipe downwards at theirs.

How can I tell what kind of market we are in?

While bear markets are usually not usually considered a "true" bear market unless they are accompanied by a drop of more than 20%, there are several indicators which can provide insight into the overall market environment.

• Market Supply & Demand
• Investor Psychology
• Media Coverage
• Futures & Short Interest

In a bull market, the general consensus is that prices will continue to rise, and as a result demand is stronger than supply. What this means is that there are more interested buyers than there are sellers, because buyers anticipate their purchases will increase in value in the near future. Bear markets see the opposite conditions: supply exceeds demand for securities, because sellers anticipate that their investment will be worth less in the near future.

Tweets, news coverage, conversations, and more can also provide context on the condition of the market. "Bullish" investors are optimistic, believing that the market (and their returns) will increase in value. "Bearish" investors are pessimistic, believing that the market (and their returns) will decrease in value. This sentiment can provide valuable insight into where the market may go, because these opinions and discussions are what will ultimately drive traders to make investing decisions. It is worth noting, however, that widespread overly-bullish or overly-bearish sentiment can signal a coming reversal of the markets. A prime example of this is the "Dotcom" boom and bust in the late 1990s, characterized by what Fed-chair Alan Greenspan referred to as "irrational exuberance" on Dec. 5 1996. During this time, the overall market sentiment was so bullish that investors were eager to invest in nearly any project (at any valuation) that was internet-related or ended with the suffix ".com" The ending result, as many of you know, was a bubble burst which wiped out more than $1.7 trillion in value. This carefree bullishness which was rampant in the market could have been viewed as an indicator that a bear market was looming on the horizon.

Futures and short interest are other indicators that can be used to evaluate where investors see the market heading in the future. Futures contracts allow investors to pay a premium today to lock in a purchase price for a designated quantity of securities at a specific date in the future. If investors anticipate a coming bear market, demand for futures contracts below the current price will increase, and if investors anticipate a coming bull market, demand for futures contracts above the current price will increase. Similarly, shorting a security allows you to borrow that security and sell it at the current market price, with the condition that in the future you will buy that security back at the market price to settle your position. If an investor anticipates that a stock will decrease in value, they can sell the security today (locking in the higher price) and buy the share back in the future after the price has dropped to close out their position. The resulting profit from this short position would be the difference between their open (sell) price and their close (buy) price, minus any fees/interest paid.

How can I make money in these markets?

Bull markets tend to be easier to earn a profit in, because simply buying and holding (a.k.a. "HODLing" in the crypto world) the security while it increases in value will create profit for you. All it takes to profit in a bull market is buying the correct securities to invest in and selling them at a later date after they have increased in value.

Bear markets can be a bit trickier to profit during. If the overall market is decreasing in value, the securities in your portfolio will most likely decrease in value over time, so buying and holding is a riskier strategy in the near term. That does not mean that there is no way to make money in a bear market, though. Identifying securities which are undervalued, have upcoming catalysts (news, releases, etc.), or move independently of the overall market can lead to profits even during bear markets, as these securities may see prices increase even as the overall market trends downwards.

For more experienced traders, shorting and scalping are effective, albeit higher risk, ways to generate profits. As mentioned above, shorting a security allows you to sell at today's price and buy back at a future (hopefully lower) price to close out your position, with your profit being equal to the difference between your open and close prices. Scalping, on the other hand, is a trading strategy which focuses on high volumes of trades which each generate small profits. Scalpers use large quantities of short-term trades, entering positions with an exit target in mind and exiting once those conditions are met, to turn a quick profit. Even if each of these trades only generates a small profit, over time these small profits can add up to a sizable return. Please note that this is a very high-level description of both shorting and scalping - if you are interested in trading these strategies, I highly recommend researching and practicing with test portfolios prior to investing your own hard-earned money.

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