Sometimes it’s easy to make money. Imagine throwing a dart at a list of assets, buying whatever it lands on and making some quick, easy money. That’s an irrational bull market.
Cryptocurrency in 2017 was much like that. It seemed like every single asset was shooting up in price… and that’s because it was. Almost every investor felt like a genius.
Imagine hearing about the wonderful world of cryptocurrency, jumping right in and buying some Bitcoin. You make a small profit and think ‘Wow, this is easy!’. Before you know it you’re throwing more money in and buying Ethereum, XRP and other altcoins and all of them are making you more money. That’s a bull market.
What’s a Bull Market?
A bull market is a financial market where prices are increasing and buying out weighs selling.
The scenario above perfectly describes a bull market because every investor feels like a genius. When prices are going up investors are euphoric, it feels like they can’t make a wrong decision. But there is one key thing that most investors miss.
If almost every asset is increasing in price and investors are reveling in their success, doesn’t it all seem slightly unsustainable?
Bull markets are a great place to make money, no doubt about that. However, it’s usually the case that a big drop or a strong bear market, follows a long bull market. Basically, when everything looks amazing and it’s clear you are in a bull market, be prepared for the market to turn.
The Big Pop
When markets are propped up by highly speculative investors making short term profits emotions can run wild, which can lead to a sudden reversal ending the positive movement.
It just takes one catalyst to cause the entire market sentiment to turn instantly from greed to panic.
For example, if a group of traders all take profit at the same time, this large amount of selling at the same time will cause a noticeable drop in price, but nothing too extreme. However, the euphoric investors see the sudden small drop and get scared. They don’t want to lose their money, so they rush to sell.
The rush to sell at the first sign of downside causes a huge price drop that begins the ‘bubble pop’ and usually marks the transition from a bull market to a bear market.
2017 in Cryptocurrency
2017 was, without a doubt, the biggest bull market cryptocurrency has ever seen and possibly the most irrational but lucrative bull market of all time.
All it took was buying early in the year and selling at the end. People turned thousands into millions.
Will it ever happen again?