The Bulls And The Bears: Market Sentiment Explained

“Bull” and “bear” are the two words investors use most often to describe the mood of a market. The names “bear” and “bull” are used to describe the broad direction and emotion of a single asset, an entire sector, or the market as a whole.

A market that keeps trending higher is informally called a bull market. During a bull market, optimism is widespread and investors are willing to buy in expectation of further gains. The opposite is true in a bear market: fear and the expectation of further declines push investors to sell, often well before any actual recession or crisis materializes.

Bulls vs Bears: Market Sentiment Explained

The words “bull” and “bear” describe the overall performance of equity, commodity, and crypto markets. They capture both price action and the psychology that drives it. Sentiment is a dominant force on portfolios, so understanding the regime you are in matters as much as understanding the assets you hold.

A bull market is one in which prices keep rising and macroeconomic conditions are generally supportive. A bear market develops when growth slows or contracts, risk appetite fades, and most assets trend lower for an extended period.

Because sentiment feeds back into prices, these terms also describe how participants are positioned. In a bear market, many investors trim or sell holdings to lock in cash and reduce exposure. In a bull market, the same investors are more willing to add risk, hold winners longer, and buy on dips.

How to Identify a Bull or Bear Market

The most widely used rule of thumb is the 20% rule. A rise of 20% or more from a recent low is generally treated as the start of a bull market. A fall of 20% or more from a recent high is treated as the start of a bear market. The thresholds are arbitrary, but they give analysts a common reference point for talking about cycles.

Beyond the 20% rule, market participants look at a handful of structural signals:

• Trend in higher timeframes: a sequence of higher highs and higher lows on the weekly chart points to a bull market; lower highs and lower lows point to a bear market.
• Breadth: in a real bull market, most assets in a sector rise together. When only a handful of names are pulling an index higher, the trend is fragile.
• Volume on rallies vs declines: heavier volume on up days suggests accumulation; heavier volume on down days suggests distribution.
• Macro backdrop: falling interest rates, easy liquidity, and rising earnings tend to coincide with bull markets. Tightening cycles and deteriorating growth tend to coincide with bear markets.

Where Do These Terms Come From?

The labels are intuitive once you picture the animals. A bull attacks by thrusting its horns upward, which mirrors a market driving prices higher. A bear swipes downward with its paws, which mirrors a market falling lower. Both animals are powerful and unpredictable, which is part of why the imagery stuck.

The historical origin most commonly cited points to 18th-century London. “Bearskin jobbers” sold bear pelts they did not yet own, hoping to buy them back at a lower price before delivery, which is the same idea as short-selling. The “bear” label transferred from the trader to the falling market they profited from. “Bull” became the natural opposite, helped by the popularity of bull-and-bear baiting as a public spectacle at the time.

You will sometimes see the terms traced back to the surnames of two old London banks, the Bulteels and the Barings. That story is folk etymology and is not supported by primary sources. The bearskin-jobber explanation is the one historians return to.

For more market jargon, the crypto dictionary has full definitions of the related terms.

What Are Perma-Bulls and Perma-Bears?

A perma-bear is an investor or commentator who is bearish in every market regime. They expect prices to fall regardless of conditions and will usually frame any rally as a “trap” before the next leg down. The danger of a perma-bear stance is that it eventually predicts a downturn that does happen, but only after years of missed upside.

A perma-bull is the mirror image: someone who stays bullish through every drawdown and treats every crash as a buying opportunity. The risk is staying fully invested through prolonged bear markets and giving back returns built up in the previous cycle.

Most experienced investors aim for the middle: bullish when conditions support it, defensive when they do not, and prepared for either regime to last longer than expected.

Sentiment Indicators Traders Watch

Sentiment is hard to measure directly, so traders rely on a handful of indicators that proxy for it:

• Crypto Fear and Greed Index: a 0-100 score that combines volatility, momentum, social signals, and Bitcoin dominance. Extreme fear historically marks local bottoms; extreme greed often coincides with local tops.
• Funding rates on perpetual futures: persistently positive funding rates show traders are paying to stay long, which signals bullish positioning. Negative funding shows the opposite.
• Open interest: rising open interest alongside rising price suggests fresh capital is entering. Rising open interest into a falling price often signals aggressive shorting.
• Stablecoin supply: growth in circulating stablecoins implies dry powder waiting to deploy, which tends to precede risk-on moves.
• On-chain holder behaviour: long-term holder accumulation during weakness is a classic bull-market setup; distribution into strength is a classic bear-market setup.

How Crypto Bull and Bear Cycles Have Unfolded

Crypto cycles have historically been sharper and shorter than equity cycles, with full peak-to-trough drawdowns of 70% or more across the last decade. Three cycles are useful reference points:

• 2017 to 2018: retail-driven ICO boom drove Bitcoin to roughly $20,000 in December 2017, followed by an 84% drawdown into late 2018.
• 2020 to 2022: stimulus-fuelled bull run carried Bitcoin to roughly $69,000 in late 2021, before a 77% bear market through 2022 took it back below $16,000.
• 2023 to 2024: the spot Bitcoin ETF approval in early 2024 triggered a new bull leg, with Bitcoin printing fresh all-time highs above $100,000.

The pattern that repeats is that bull markets feel obvious at the top and bear markets feel obvious at the bottom. The more familiar you become with how prior cycles unfolded, the less startling the next bull or bear regime will feel, and the easier it becomes to size positions to your conviction rather than to the mood of the moment.