The bitcoin rate after a long time of fall was again in the growth zone. Investors react to the situation with caution, bearing in mind the recent fall of the leading currency below $ 6000. Some experts predict an improvement in the situation, while others believe that growth will not be for long. Why does the bitcoin rate rise and fall? There are several theories and one of them is the eternal confrontation between bulls and bears in the market. We will describe this theory in the article!
Why Bitcoin Rate Rises and Falls: Bulls and Bears Confrontation Model
It is considered that the causes of fluctuations in the rate of Bitcoin are external factors of government orders, internal changes, and so on. The theory about the confrontation of bulls and bears on a cryptomarket says that the market participants overwhelm the fluctuations in bitcoin prices. They use external factors and use them to their advantage.
As a result of the disposition, Bitcoin infrastructure and other internal features really affect its market, but only to the extent that market players allow it.
Players on the crypto market are divided into two categories for those who find it more profitable to lower the course of Bitcoin, and those who find it more profitable to raise it. The first players are called bears in financial circles, the second – bulls. Bears “crush” the course with their weight, causing it to decline, and the bulls, on the contrary, persistently push it up.
Why Bitcoin Rate Rises and Falls: Bull and Bear Motives
The motives why a player chooses one or the other side are different. Market participants can act in accordance with their beliefs about Bitcoin or in accordance with the benefits that can be gained at the moment.
Speaking of convictions, bears are usually skeptics. They are sure that nothing good can be expected from Bitcoin and cryptocurrency at all. They claim that Bitcoin lacks inner value and that it is a short-lived, extremely speculative tool. “Bulls by conviction” – on the contrary, are behind the blockchain technology and are confident that one day the world will switch to them completely.
For reasons of benefit, bulls and bears are simply market participants who act from their own beliefs and emotions. They try to profit from a financial instrument. Players make forecasts, analyze and owning sufficiently significant financial resources, work on the Bitcoin market to earn maximum in accordance with the results of their analysis and actions.
Acting on the market in one way or another and / or forming their beliefs, both categories of players are guided by a number of external and internal factors. You can divide them into several groups.
During periods of comparative certainty in the market, the behavior of both bulls and bears in the presence of one of the listed factors is more or less predictable, since the forecasts, taking into account certain initial circumstances, are approximately the same and the players act in one direction. Most often, one group is activated, the other – on the contrary. Collisions happen, forming a short sideways trend, but relatively rare.
In periods of uncertainty in the market, bulls and bears, regardless of their motives, are faced much more often with one of the listed factors. The uncertain situation gives rise to different forecasts, different conclusions, more errors, different actions and reactions to errors.
Some players in uncertain circumstances go into a bearish trend, considering it more profitable for themselves, others go in a bullish one for the same reason. Uncertainties add to the changing beliefs of market participants, as a result of which some bears begin to promote cryptocurrencies, turning into bulls, and some bulls are convinced of the meaninglessness of Bitcoin as a means of payment and are moving into a group of bears.
In simple words, in a period of uncertainty, the forces of bulls and bears equalize and the confrontation begins. In the course of the confrontation, the positions change, some players leave the market, others come. Some players lose money due to mistakes, while others suddenly decide to play with a large amount of appreciation. As a result, one side (provoking a growth rate) or another wins (provoking its decline) – and the course constantly fluctuates.
The confrontation may not last long if there comes some certainty that allows market participants to confidently withdraw into a bullish trend or a bearish one. If certainty does not occur, bulls and bears can fight for months – by changing positions of each other and not finding a way out of the created uncertainty.
From this event, different market participants made different conclusions. Some thought it was a natural correction, which would later be replaced by a bullish trend. Others decided that this was the “beginning of the end” and went over to the side of bears The Bitcoin futures have added uncertainty. They were more convenient to play to low the rate – and thus provoke uncertainty.
The unexpectedness of the fall of Bitcoin, the resulting uncertainty and panic led to the formation of two opposing camps in the spring – bull and bear.
Positive events around Bitcoin provoked short victories of bulls and negative events provoked short victories of bears. The difficulty was that there were approximately equal amounts of positive and negative news and events, and this meant that neither the bulls nor the bears could hold their “victory” for a long time.
Uncertainty, however, cannot be all the time. Now a noticeable bullish trend emerges, the bitcoin rate has risen substantially. It is possible that this is the way out that players have expected since spring.
Why is there a bullish trend and how long will the growth rate of Bitcoin last?
The fact that Bitcoin was able to withstand long-term fluctuations at lower elevations, speaks in favor of the fact that it still has inner value and is not just a speculative tool.
“Inflated bubble”, as skeptics called Bitcoin, could hold on for two months, after which it would fall sharply, perhaps – it would hold on for some time and “blown away” finally. He would not have the internal potential for further growth and to oppose his own deflation.
Apparently, this conclusion was reached by the participants of the current confrontation both from the bull and from the bear side. The bulls, finally waiting for the end of the protracted struggle, pressed even harder – and the bears succumbed.
It is also possible that the short-term players are simply tired of “crushing” the bitcoin course. Thanks to the support of the bulls and the internal potential, which still attracts investors, albeit in smaller numbers, Bitcoin is trying to break up, and to contain it at $ 5,000 to $ 6,000 requires much more resources than tired bears are capable of today.
Also, among the factors that could affect the bulls and push the bears back, there may be permits, given by US regulators to the Coinbase exchange, now trading on it is equal to trading in securities, and its activities are fully legalized.
However, hidden factors could affect. For example, there has recently been a revival in the circles of large American investors. Experts associate it with the launch of the ETF, as well as with so far unknown expectations in the circles of “whales”.
It is not excluded that the manipulators who noticed a revival in the market contributed partly to this. Recently, the number of negative events has slightly decreased – and positive ones on this background have become sharply marked both for investors and for market players, who instantly brought Bitcoin into a bullish trend.
Whether investors pick up the current trend or are we waiting for a return to the previous struggle – while it is unclear investors, disoriented by previous fluctuations, still behave cautiously, which means that bears can put pressure again at a convenient moment.