bully (n.)
1530s, "sweetheart," a term of endearment applied to either sex, of uncertain origin; perhaps from Dutch boel "lover; brother," which probably is a diminutive of Middle Dutch broeder "brother" (compare Middle High German buole "brother," source of German Buhle "lover;" see brother (n.)).

Meaning deteriorated 17c. through "fine fellow" and "blusterer" to "harasser of the weak" (1680s, from bully-ruffian, 1650s). Perhaps this was by influence of bull (n.1), but a connecting sense between "lover" and "ruffian" might be "protector of a prostitute," which was one sense of bully (though it is not specifically attested until 1706). "Sweetheart" words often go bad in this way; compare leman, also ladybird, which in Farmer & Henley is "1. A whore; and (2) a term of endearment." Shakespeare has bully-rook "jolly comrade."

The adjective meaning "worthy, jolly, admirable" is first attested 1680s, and preserves an earlier, positive sense of the word. It enjoyed a popularity in late 19c. American English, and was used from 1864 in expressions, such as bully for you! "bravo!"
bully (v.)
"overbear with bluster or menaces," 1710, from bully (n.). Related: Bullied; bullying.