Are we Bull or Bear?

The terms bull market and bear market are now commonly used to conceptually describe financial market trends: the crypto sector, which has always winked at symbolism and the esoteric since its inception, could not be any different.

A bull market tends to be characterized by a period of rising prices, characterized by optimism and high demands.

A bear market, on the other hand, is a period when listings fall, pessimism prevails, and the trades are few.

The cryptocurrency market is much more temperamental than the traditional one: with great possibilities come great risks, and it is important for investors to fully understand the concepts related to bull and bear, so as to be correctly informed, without misunderstanding “sentiment,” which as we all know is one of the most important factors that must be considered in this crypto world.

The origin and first use of the terms “Bear” and “Bull” in financial slang is unclear. Probably the term “Bull” (bullish market) derives from the stock exchange in Flanders (the term “ Bourse” itself comes from the Van der Burse family), because of the monosyllabic terms used by buyers: the one associated with the bull would have been very close to the animal’s cry.

According to other interpretations, the term “Bear” (bear market) derives from the custom of bear-skin sellers who, historically, bought them from hunters at fixed prices and thus made money when there was a drop in the value of the skins sold by hunters (when, i.e., the market went “down”), as the difference between their buying and selling value increased and with it the trader’s profit (the expression “Don’t sell the bear skin before you kill the bear” probably owes its origin back to this scheme).

The term “Bear” in this sense was also used in “The Anatomy of Change Alley”, Daniel Defoe’s 1719 novel in which it is stated, “Those who buy Exchange Alley Bargains are styled buyers of Bear-skins”, with the reference thus still to speculative buying at times of market downturn for the Exchange Alley, an alley market in London where at the time everything was to be found.

The expression “Bear” to refer to a bear market and thus potentially speculative reached popularity, however, with the bubble of the South Sea Company, founded in 1711 that had signed an agreement with the English Crown to purchase British war debt (£10 million at the time) in exchange for an annual interest obtained from the state of 6 percent and a monopoly on trade with Spanish colonies in South America. The company took to continuously issuing shares at increasing prices, as a result what one would call today the earnings per share ratio began to decline until the crash that also swept away the investments of scientist Isaac Newton, who nine years later lost £20,000 in this bubble: the equivalent to about $4 million today.

Isaac, somewhat despondent, declared, “I can calculate the motions of the celestial bodies, but not the madness of the people.”

BULL & BEAR

I liked too much this early draft

It is a fairly common practice to blame someone else for one’s own mistakes, and even Isaac Newton, when he lost all his savings in 1720 however brilliant, was still human, fallible, and probably too busy watching apples drop from trees than the signs of a falling market.

However, one does not have to be a genius to lose money in crypto: it is such a bizarre market that it can affect anyone, even fashionable people, who should know how to dress in this crypto winter. This is the case of Paris Hilton: in 2018 she had invested $2 million in Lydian Coins ICO, which later turned out to be a scam. Nonetheless, unlike our beloved physicist, she did not end up broke, go figure!

Man is ultimately a social animal who likes to join the herd, be it bear or bull. For many of us, it is more of a priority to cultivate this feeling of belonging than to inform ourselves and act independently of what others are doing.

This leads to market dynamics such as FOMO and FOBO (Fear of Missing Out and Fear of Being Out).

FOMO is the fear of missing out on a potential gain or opportunity, which drives us to make impulsive decisions based on the actions of others without conducting our own research. FOBO, on the other hand, is the fear of being excluded from a potential loss, which leads us to make hasty decisions like to exit a market without fully considering the potential consequences.

Caught in a landslide

Bulls and bears can both become trapped in the wild for various reasons. For instance, bulls may fall into pits, become entangled in man-made structures, or be attracted to bait, resulting in their inability to escape and putting them at risk of harm, while, bears may be caught thanks to a simple bait or a Smola trap: multiple capture chambers designed to be attractive and easy to set up.

In order to best identify them, being geopolitically informed is essential, and although exchanges now offer us a wide range of features and statistics, knowing how to master a little bit of math can still help, for example regarding the RSI (Relative Strength Index).

This is a momentum oscillator that compares the magnitude of gains and losses in an attempt to find some trap.

All we have to do is calculate RS, or average gain, and divide it by the average loss.

At this point le jeux sont fait, and the RSI is given by 100 — (100 /( 1+ RS))

A value below 30 is indicative of an asset oversold → bear trap

Above 70, it is probably overbought → bull trap.

For instance, an RSI of 65 indicates that the asset is close to being overbought and a trend reversal or price correction could occur.

In mid-March 2020 for example, Bitcoin was in free fall, but an RSI of 15 indicated that it was oversold and that there would be a reversal soon, so much so that it was the last time (until now) that it was possible to buy one for $5,000

For the lazy ones, it’s also possible to monitor the RSI of bitcoin directly here:

https://buybitcoinworldwide.com/stats/monthly-rsi/

Another thing that jumps out at anyone is that the last three all-highs were followed after a week by persistent bull cycles.

Keep calm and carry HODL

Who said that during a bull market, we have to actually participate in bullfighting?

Why not enjoy the moment?

Simply do some X on the calendar, unplug the brain and buy fixed amount of assets at fixed intervals.

Even being in the middle of a bear market, as appaling as it may be, can be refreshing.

There is no need to live in anxiety, constantly informing ourselves and standing at the window watching what others are doing.

It is enough to hibernate and wait for the dew of crypto-spring to wet our lips parched by the frost of winter.

These are all valid strategies, unless something huge happens…

The black swan

The alternation between bull and bear markets is a natural part of the crypto market cycle and can also create opportunities for traders and investors.

During a bear market, traders can easily get into business at lower prices, while a bull market gives a chance to take profits and sell their positions.

A black swan event is a rare and unpredictable occurrence that can have a major impact on the crypto market, such as a sudden change in government regulations, a significant security breach, or a major economic crisis. These events can trigger a rapid and significant decline in the prices of cryptocurrencies and can cause significant losses for investors who are unprepared or have highly leveraged positions.

Exactly.

Black swan events should be rare.

Too bad these kinds of occurrences have exponentially increased from the creation of Bitcoin to now.

Let’s look at this trend together.

• The collapse of the Mt. Gox cryptocurrency exchange in 2014.

• The Ethereum hard fork in 2016.

• The DAO Hack and the subsequent Ethereum hard fork in 2016.

• The SEC’s decision to reject the Winklevoss Bitcoin ETF in 2018.

• The Bitcoin Cash hard fork in 2018.

• The Bitfinex controversy in 2018.

• The BitMEX scandal in 2019.

• The QuadrigaCX collapse in 2019.

• The Facebook Libra launch failure in 2019

• The COVID crisis in 2020

• The chinese “total” mining ban in 2021

• The Ukrainian war in 2022

• The Terra/Luna crash in 2022

• The Celsius and 3AC bankrupt in 2022

• The FTX crash in 2022

Animal (crypto) Farm

While for a bear, hibernating longer than necessary hardly poses serious risks, for a bull going hunting when conditions are not right can be fatal : bulls are known to engage in violent battles for dominance over territory, mates, or resources. These contests can be deadly: those that survive may still be severely injured and unable to defend themselves against predators or other threats.

In the crypto arena, traders and investors can be caught off guard and make the move at the wrong time. It is therefore important to be aware of our surroundings, to guard against market predators and protect our assets.

Ultimately, just as survival in the wild requires adaptability and a keen awareness of one’s environment, success in the crypto market requires traders and investors to be agile, adaptive, and informed.

Just like the creatures in the ocean, the crypto market also has its own set of players. While investors in the crypto market may not have the long-term memory of an elephant, it’s more like the forgetful character Dory from the Pixar movie. In this underwater world of crypto, there are small fishes (simple investors), whales (early adopters who hold large amounts of assets), and sharks (exchanges like Binance that can move the market with their actions). Each player has a role in determining the direction of the crypto market and contributes to the rise and fall of crypto prices.

By the way, how is it possible that despite everything, Binance still hasn’t blown up? Isn’t it sad that everything is still standing and CZ continues to fester on social media? What distinguishes him from SBF, DK and MK? (Sam Bankman-Fried, Do Kwon and Mark Karpelès).

One simple, small detail: he has not been busted yet.

So we enjoy this truce, ignoring the Cassandras’ warnings, keeping Binance’s box tightly shut, forgetting about the 1.2 billion uncollateralized 2021 BNBs, the double chains to juggle with the peg, and who knows what else.

But let’s say it does happen.

Yes, there might finally be more decentralization and fewer (at least one) bad actors around, but at what price?

We’ve already seen how the FTX collapse wiped out a lot of cryptocurrencies, even calling into question the resilience of established cryptocurrencies like Bitcoin and Ethereum: what would the collapse of an exchange 10 times larger entail?

Realistically, we could end up with a fistful of cryptos in our hands, of little value besides, and we should consider that other exchanges of dubious morality could occupy the boundless prairies cleared by this cumbersome disgraced competitor.

Who knows when we will finally move from KYC (Know Your Customer) to KYE (Know Your Exchange).

We’ve seen that the Fed recently fined another exchange (Kraken) of $30 million for committing the capital crime of allowing ordinary citizens to stake: are these the behaviors that should be sanctioned?

Why all is left is the impression that for many governments crypto is just an excuse to implement some sort of CBDC and/or make cash?

Little high, little low

Bohemian Rhapsody is the song whose roller coaster of emotions most captures the ups and downs of the cryptocurrency market.

It’s true: crypto is a wild ride, full of twists and turns, but this masterpiece also entails the sheer drama and unpredictability of it all. Just when we think we’ve got a handle on things, the market pulls the trigger, sending shivers down our spine.

This Queen’s anthem is also a testament to the resilience and determination of the human spirit. And just like the song, the crypto market is here to stay, whether the SEC likes it or not: a chest where also a poor boy from a poor family can have a chance.

So we don’t care about anything, we carry on, carry on as if nothing really matters little high, little low it’s all part of the show.