I have been in the crypto space since 2017 and have experienced the different cycles of the crypto market over the years. The fact is, it’s important to carefully study and understand the market cycle before investing your money in whatsoever.
Also, I have come to understand that the actions from a market cycle directly/indirectly lead to the next cycle. I’m this blog post, I will be discussing these points and their effects on the market.
Firstly, there are generally four stages in the market cycle:
Accumulation:
This is a period when savvy investors start finding more interest in their favorite assets and start accumulating them gradually. During this stage, these assets form a base price and their chart looks good for future growth.
Bull market:
This is the next stage after accumulation. This stage is driven by optimism and excitement with different investors buying assets and hoping they keep rising. During a Bull market, I always make a statement that "everyone is a good trader". The reason is that coins or assets tend to appreciate more than they fall. So, even a one-year-old baby could blindly click on a buy button and still make a profit.
Another thing I have noticed during this time is that there tend to be more crypto influencers on Twitter giving finical advice. Funny how it’s the opposite during a bear market.
Top:
One of the most difficult cycles to detect for most traders is the TOP. The top refers to the peak assets reach before they begin to decline in price. The most difficult cycle to detract from as most readers get carried away by the bull market. During this time, most assets hit their all-time highs.
Bear market:
One of the most hated cycles. Especially long-time ones. This happens just after the top and all prices start falling gradually till the whole market enters a bearish phase. This market cycle is characterized by pessimism and negative sentiment.
Maximum greed happens at the top
In the crypto market, maximum greed happens at the top. This is the point where assets reach their ATH ( all-time high ). As stated before now, most investors or traders find it difficult to tell when the top hits. In fact, there are times when technical analysis of assets seems useless.
Smart traders who aren't greedy with their trade take profit at this stage to watch what happens next, while some make impulsive or risky investment decisions.
Maximum fear happens at the bottom
On the other hand, maximum fear happens at the bottom. This is the stage where investors make hasty decisions based on their fear, like selling their long-term holdings at a loss. Also, there is often a lot of negative news surrounding the media.
For instance, we recently experienced the FUD surrounding Binance. The market reacted to that news.
No one knows what the future holds but applying good strategies while investing would really save you from huge losses.
- Do your research
- Have a plan
- Use stop-loss orders
- Diversify your portfolio:
- Stay up to date
- Don't let emotions guide your decisions
Disclaimer: cryptocurrencies carry inherent risks and may not be suitable for everyone. It is always a good idea to carefully consider your financial situation and risk tolerance before making any investment decisions.