Investing in the stock market means bravely taking a risk. You might end up winning or you might end with so many regrets. That is why for investors, keeping an eye on the market condition is very important.
Bull and bear – these are the two terms they used to describe the performance of the stock market. A bull market simply means there is an upward trend while a bear market means the opposite.
To further understand the concept between these two, here’s a brief discussion on the bullish vs. bearish markets.
Supply and Demand
In a bear market, the usual scenario is that there are more stocks (supply) rather than investors (demand). In this case, the prices of stocks are declining and the defeat is waving.
On the other hand, a bull market is characterized by many enthusiastic investors (demand) trying to compete with others in buying a stock (supply). Here, the prices of stocks are increasing, especially when more investors want it. But, more importantly, the victory is waving at you in this scenario.
Fate of Stocks
In preparation for the bull market, investors usually buy as many stocks as they can during the early period. They will wait for it to grow until it becomes ripe enough. In other words, until it grows into a stock that is worth buying.
But, as preparation for the bear market, investors usually sell their stocks immediately, and in unfortunate situations, at a very low price. They will then find a large company where they can invest safely. Others make a profit out of the bear market by doing short selling or buying inverse ETFs. However, the risks and the chance of losing these two options have been high.
Company’s Earning
When consumers suddenly become stricter in spending their money, it affects a company’s earnings. And when a company or corporation starts to experience a decline in its earnings, then it is a major sign that a possible bear market may occur, especially if the downward trend continues.
You will also know that a bear market is coming if large banks are setting tighter credit conditions for those companies trying to borrow money from them. Meanwhile, when consumers are spending more, it has a positive effect on the earnings of the company, especially if it continues for a long period. That is when we can say that a bull market is approaching.
GDP Growth and Unemployment Rate
By looking at the rate of the Gross Domestic Product (GDP) of your economy, you can also tell whether the market is bullish or bearish. If the GDP figures are rising, it means that a bull market would likely occur. On the other hand, if it is falling in numbers, then a possible bear market would likely occur.
Moreover, if there is a low unemployment rate, it means many people have money to buy stocks or commodities since they have jobs as the source of funds. That also means a bull market is on its way. But, if the unemployment rate is high, it means many people have no source of funds and not enough money to buy their wants. This scenario also tells that a market might turn bearish.
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Veteran investors surely know the importance of learning the concept of bull and bear markets. But for the neophytes in the league, it is a must to learn these two market conditions so you would not have regrets in the end. To end this, let me leave you this line: Always choose those with positive returns.
While cryptocurrencies might look like an incredibly tempting investment opportunity at the moment, not everyone is on board. While the absurd volatility of the most valued currency on the market – Bitcoin – does not exactly make it a risk yet, it is a legitimate cause for concern for those who look at the past.
Sure, the proponents may argue that it is the future, and looking back will not give us a good idea of what’s to come, but should we neglect the lessons we’ve learned over the years?
If you look at what has happened in the past when it comes to reaching those type of heights, be it tulip bulbs or a bunch of other things over the centuries, the odds are against those who actually think that this is going to be the future.
What should we expect if this cryptocurrency surge is indeed a bubble?
The prices will most likely fall and become a lot more stable. Current volatility actually works against the cryptocurrency’s main purpose – facilitating access to the financial services. If the cost of blockchain transactions can increase tenfold or more in a very short period of time due to the price hikes that become rather common, how can we expect to build a stable foundation for anything?
A significant number of currencies will fade away into oblivion, leaving only the most common and stables ones. Bitcoin and Ethereum appear to be the two most likely survivors at the moment. There seems to be enough momentum behind those two to keep them afloat even in the grimmest scenarios. Provided the volatility issue is dealt with, these currencies can indeed become a significant part of our financial future, even if traditional banking is not likely to disappear altogether.
