Ever since the collapses of $LUNA, 3 Arrows Capital, Celsius and FTX,...
It’s critical to comprehend the nature of and potential for prediction of crypto market movements. Additionally, when there are cycles within cycles, the complexity rises, making it even more crucial to understand how cryptocurrency markets function in order to optimize profit.
Picture being able to eliminate speculation from buying. Given the volatility of cryptocurrencies, it might seem impossible, but there is a methodical strategy to trading that you can implement and benefit from. In contrast to many of those amateur YouTube psychics and their clickbait price forecast videos, you will be able to anticipate future price movements by learning to recognize the cyclical structure of prices.
We’ll teach you how to clarify crypto market cycles by identifying their distinct phases. You need professional-level techniques, such as numerous time-frame analyses, as well as a solid comprehension of cycles within cycles in order to trade like a professional. With this information, you’ll be able to identify the longer-term pattern, which will serve as your protection during volatile market periods such as crypto winter or bear market.
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In the simplest terms, a cryptocurrency market cycle is an interval between a market’s high and low. All financial sectors experience market cycles. It is a succession of cycles that will unavoidably emerge and then repeat over time. Because of the quick price changes, periods in cryptocurrencies can often be much shorter than in other markets.
Market cycles are essentially distinct patterns that frequently result from both the psychology of participants in the market and the larger economic climate. Every market experiences this as a normal occurrence, and the cryptocurrency market is no different.
A crypto market cycle typically starts with very little to no enthusiasm about the market. With the rise of interest, asset values typically increase to keep up with the escalating demand. Prices ultimately peak and begin to decline as supply exceeds demand and many early investors start to take profit. Each cycle has a beginning and a conclusion.
Even though it can be challenging to predict when a market cycle will begin or finish, the majority of cryptocurrencies (aside from stablecoins) go through a similar progression. You can participate in the market more intelligently if you are aware of the traits of each stage and how to handle each of them.
Every market cycle starts with an accumulation phase, which typically follows the previous cycle. This phase occurs when sellers leave the market and prices begin to stabilize. In the accumulation phase, enthusiasm in the market is low, and so is the market volume.
Typical characteristics of this crypto market cycle stage include:
This phase is also referred to as a consolidation phase signaling the end of a downtrend. Due to the difficulty in predicting whether the asset will keep declining, some market participants may still view it as a risky moment to invest. However, long-term investors frequently view the consolidation stage as the buildup to what they believe will be the beginning of a bull market.
For long-term investors, this time period is particularly appealing. Nevertheless, perseverance is essential for short-term traders because this stage can last longer than anticipated. The good news about the general state of the market now draws participants’ focus and possibly moves the market into the next crypto market cycle stage.
This phase, also known as the bull market phase, occurs when the prices start to accelerate. New participants join the market during the markup phase, which may further result in a remarkable growth in volume.
During this stage, positive headlines permeate the press, infusing market players with optimism. However, a slight dose of caution is still present. When the supply of an asset starts to exceed the demand, prices start to increase accordingly.
The key characteristics of this stage in the crypto bull market cycle are:
Since the rising price trends could be easily spotted during the markup phase, this is a great opportunity for new participants to join the market. Though there might be drops in the asset value, many traders view them as a chance for purchase rather than a warning sign.
When a bull run is over, some purchasers eventually turn into sellers. The market’s buyers and sellers are in equilibrium during this crypto market cycle stage called the distribution stage.
On the one hand, some buyers believe that the bull market will continue, and are seeking to purchase assets accordingly. Sellers, on the other hand, are attempting to lock in their gains. While trading activity remains high, the values of assets typically fluctuate within a specific range.
Because of the prevailing uncertainty over whether the growing trend will continue or a bear market is lurking, this phase may lead to a change in the general market sentiment. What was once optimism may suddenly turn into fear and greed.
You can recognize the distribution phase by:
Though the distribution phase is a part of the crypto bull market cycle, it is the first indication of the bull market waning. Consequently, some may conclude that a new downward tendency may be on the horizon.
In anticipation of what they believe will be an impending bear market, some participants who purchased an asset before or at the start of the markup phase may start selling their holdings. This signals the beginning of the last phase in the market cycle.
The markdown phase is a crypto bear market cycle stage the majority of market participants find most terrifying. It begins when the supply in the distribution phase outpaces the demand. The typical sentiment is fear with an exceedingly negative outlook.
The selling pressure increases as participants’ fears about the future condition of the market grow. This downward impact has the potential to drive asset prices incredibly low.
The main features of this crypto bear market cycle phase include:
This stage is a short seller’s paradise since it’s the period when they stand to profit from the market decline. Even positive news can struggle to reverse a downward tendency in an asset during this phase because participants are taking precautions to limit losses in the challenging market environment.
However, there is hope because markdown stages are transitory in nature. The new crypto market cycle typically begins at the end of this period.
Even though cryptocurrency is a relatively young asset, it has experienced several market cycles so far. The markup phase of the first cycle occurred in 2013 when in only a few months, the Bitcoin (BTC) price increased from $150 in the accumulation stage to more than $1,150 at the pinnacle of the markup stage. It then plunged to $250 in early 2015.
The next markup phase peaked in 2017. At the time, BTC price amounted to $1,000 only to surge to a whopping $19,000 by the end of the year, only to drop to $3,700 in 2019. When the COVID-19 pandemic broke, BTC surged again. It started the year at nearly $7,000 but hit $29,000 by the end of the year.
In 2021, it smashed its record from 2020, exceeding $60,000. The asset experienced considerable fluctuations after reaching its all-time high of over $68,000, eventually dropping to about $16,000 in 2022.
From the Bitcoin price example, we can conclude how long the crypto market cycle is. Typically, an average cycle takes four years to complete. However, it’s worth noting that this is not set in stone, and there may always be some black swan exceptions the market hasn’t experienced so far.
As part of a crypto market cycle, a bull market is characterized by all-around positive economic circumstances. It indicates that a market is growing and is typically accompanied by optimistic investor feelings regarding the uptrend that is currently in effect. In a bull market, there is a steady rise in asset values along with a robust economy and high employment rates.
Both conventional and cryptocurrency markets are affected by this trend. However, stronger and more regular bull-run crypto stages are more frequently seen in cryptocurrencies.
But what usually happens during a crypto bull run? A 40% price rise over one or two days is a fairly common occurrence. This is due to the fact that cryptocurrency markets are more volatile due to their relative size compared to conventional markets.
During the bull run, many investors are purchasing cryptocurrencies. Positive feedback commonly results from investor trust, thus prolonging the bull run (more investments = more price increases). In the case of cryptocurrencies specifically, the trust of the general public in a coin or token has a significant impact, driving the price of a particular cryptocurrency up or down.
During another part of a crypto market cycle, a bear market, the value of coins drops by at least 20% and may keep declining. As an illustration, consider the well-known cryptocurrency collapse in December 2017 when investors witnessed Bitcoin drop from $20,000 to $3,200 over a short period of time.
A decline of 20% or more from prior highs is indicative of a falling bear market. As a result, costs are low and steadily declining. Generally, 40 – 45 % drops in a bull market are considered corrections in the bull market; dips above 45% usually signal that we have entered the bear market.
The downward pattern continues as a result of the downward trend, impacting investors’ expectations. The word “bear” is thought to have originated from the way bears battle, which involves rising high before striking with their claws pointing downward and all of their weight pressing downward.
In a bear market, the economy sputters and unemployment is significant. Poor economic policies, geopolitical crises, market bubble bursts, and even natural catastrophes can cause these conditions. Additionally, buyers are less upbeat and confident in general during bear markets than they are during bull runs.
Typically, cryptocurrency traders look to buy assets when the market is down, particularly at its lowest point. But it can be difficult to predict when a bear market will end, making it difficult for investors to take the chance and buy cheap cryptocurrency that might or might not rebound.
Profiting during a crypto bear market cycle can be a challenging but not impossible endeavor. Employing certain strategies may help your portfolio shine even during these unfavorable times. Those strategies include:
With a dollar-cost averaging (DCA) strategy, you can increase your possibilities of profiting from market downturns, which are frequently seen as opportunities by investors. DCA entails making fixed-dollar-amount purchases of assets at regular periods regardless of the state of the market. The fundamental idea behind DCA is that it provides you the opportunity to buy more when prices are low. Your cost basis, or the average price you spent for each unit of an asset, decreases over time as a result of the strategy.
Cryptocurrency assets are a great way to diversify your financial portfolio, even during a crypto bear market cycle. But don’t let the prospect of enormous profits make you act foolishly. There are a huge number of trustworthy cryptocurrency initiatives out there that merit your attention. However, there are also lots of fraudsters who will make outrageous promises but never follow through. Do your research before investing any of your hard-earned money. In addition, whether a market is bullish or bearish, never spend money that you cannot afford to lose.
Only you know why you initially purchased cryptocurrency. Big market swings from month to month, or even from year to year, don’t necessarily affect that vision if you invested with its long-term prospects in mind. When crypto market cycles happen to hit the bottom, attempt to keep in mind the reasons you invested in digital assets to see if they still hold true.
Last but not least, don’t panic. Keeping a level head while investing is one of the most crucial guidelines, particularly in unfavorable market circumstances. Investors who are in a panic often make bad choices and pull their assets out of the market too soon. Always be skeptical of cryptocurrency news, especially during bear markets when everything is overrun with negativity (FUD). Keep your emotions in check when you meet positivity or negativity.
Crypto bull market cycles are not as gloomy and unfavorable as those of the bear market. Hence, making a profit during bullish runs is much easier. However, you should never take things lightly, as many cryptocurrencies are extremely risky investments.
Here are some of the strategies you can implement during bullish market cycles:
Because crypto market conditions can shift rapidly, it is challenging to anticipate when a bull run may begin. In contrast, if technical indicators and the market mood are positive, this frequently indicates a bull run is about to begin. In a bull market, the sooner you purchase, the more money you can get when you sell.
Investors frequently worry about exiting a bull market too soon and losing out on bigger profits. On the other hand, leaving it too late and completely missing the peak might be even worse.
Take regular gains and avoid FOMO. Assets can be split into parts to sell and parts to keep for future use. Employing sell limit orders is the most convenient method to accomplish this without constantly monitoring your portfolio. Sell limit orders enable you to automatically sell your coins or tokens when the market price hits a certain level.
Losses can be minimized by carefully planning your exit. Deciding to exit your position if the price closes below the trend line is one method to achieve this. Alternatively, if you believe that the bull run has peaked and you anticipate a decline — be it swift, gradual, short-lived, or sustained in a bearish manner — you may decide to short-sell.
The trend is your ally, not your foe. It’s crucial to remember that crypto bull market cycles still include both rising and falling share values despite the steady, protracted price increases. During a bull market run, this means that it is feasible to lose money in a bullish position or profit from a sell position. Therefore, it’s crucial to thoroughly analyze the developments of a bull trend before acting, while also acting promptly.
Due to the growing use of blockchain technology and the rising demand for digital assets, the cryptocurrency market has expanded considerably in recent years. However, due to its intricacy and volatility, navigating the cryptocurrency market can be challenging. You need to be conscious of important trends and insights as well as potential risks in order to make wise choices.
Some of the critical trends in the crypto market include institutional adoption, increased acceptance as a payment method, regulatory developments, and decentralized finance (DeFi). Nevertheless, you should always keep in mind that the crypto market is extremely volatile and can be manipulated. Plus, its adoption is limited, as cryptocurrencies aren’t equally accepted everywhere.
Additionally, crypto markets carry their own potential risks which may include cybersecurity and regulatory risks, as well as liquidity risks and market volatility. To mitigate them, you should consider using secure wallets and two-factor authentication, remain updated on regulatory trends and developments and manage your portfolio efficiently.
If addressed properly, the crypto market is a dynamic and rapidly advancing landscape offering considerable earning prospects. To benefit from it and avoid losses, you need to conduct thorough research to stay informed about critical trends, and insights, as well as the accompanying risks.
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