How Long Is A Crypto Market Cycle

Bitcoin’s price on October 16th, 2013: $150. On November 30th, 2013: $1,150, and on December 19th, 2013: $560. What Was That All About?

Well, those who were around back then surely remember the massive Bitcoin run towards the end of 2013, or as it is more than commonly referred to – “The 2013 Bitcoin Bubble.” We’re not necessarily calling it a bubble, although that was the consensus – it indeed had a lot to do with market cycles.

After 2013, bitcoin’s price dropped in what seemed to be a multi-calendar month bear market place. For nigh two years, the market went into a prolonged consolidation, likewise every bit a capitulation in a downtrend – until Oct 2015. That calendar month is believed to be the turning point – the beginning of the 2017 bull-cycle.

Bitcoin price slowly overcame the $300-400 consolidation which lasted for over ii years. It spiked to the $500-600 price region in the center of 2016, and from there, information technology was pretty much ‘upwardly just’ – until reaching near $twenty,000 – the peak achieved in December 2017.

After that, though, the toll started to decline, and it entered a prolonged carry market which arguably ended with the capitulation in December 2018, when Bitcoin recorded a cost in the area around $3,200. Taking a closer look at the following chart, though, information technology definitely resembles the ane from the same cycle:

Fast forward to today’due south market: Bitcoin went through a prolonged period of consolidation with a rally up to $14K in 2019 and then a subsequent retracement below $4K during the infamous COVID crash in March 2020 – which was an
unusual event
– a worldwide pandemic that was followed by the famous cascading liquidation event, which caused exchanges such equally BitMEX to halt trading.

Ever since then, though, it was ‘up just’ for the cryptocurrency, and it saw an astonishing bull market place that took its price all the mode up to well-nigh $65,000 in Apr 2021.

Subsequently reaching the peak, which is the current Bitcoin ATH, the bitcoin toll retraced past over 50% to slightly beneath $30K and is at present again on its way to recovery (as of writing these lines).

Post-obit the recent cost action, as described higher up, there is an ongoing argument if what we currently witness is a bicycle a-la-2013, which means the peak of the run will be in the coming months, or whether $65k was its peak and acme.

All this begs one serious question that we attempt to answer in the current long-class.

Bitcoin Market Cycles: The Facts

• As per the brusk history of the 2009-born Bitcoin, the market cycles lasted approximately 4 years.
• The BTC halving consequence, which happens once every four years, is believed to be in the center of the market place cycle. This is what happened in the 2012, 2016, and 2020 halving events.
• Every low of a major cycle never reached the top of the previous ane. I.e., the everyman price of 2017’s bike, ~$3120, was way in a higher place the 2013 bicycle’due south top at ~$1150 (and then far, it’s true for 2021’s cycle – the low was around $26k, which is above 2017’south high among $20k).
• The latter is true, keeping in listen the base of operations supposition that Bitcoin is a disinflationary asset whose purchasing ability will increase over fourth dimension in the long run.

Understanding Market place Cycles in Traditional Markets

Market cycles are not only common for Bitcoin. In traditional markets, nosotros are referring to the period between two highs or lows of a market. In the conservative stock market, such cycles happen over longer terms (years) on boilerplate. The paradigm below shows the cycles of the U.s. stock exchange throughout history, starting from the Great Depression in 1929.

The concluding famous recent lows of the cycles were around the years 2000, 2008, and 2020. They became known every bit the dot-com chimera pop, the sub-prime existent estate crash, and the COVID19 financial crisis.

Unlike the first two, post-obit the COVID crash in 2020, information technology took just a few weeks for Wall Street to get dorsum onto a bullish track. NASDAQ charted a new all-time loftier just several months following the 30%+ corona crash.

As information technology tin can clearly exist seen, the maxim that “markets take the stairs upward and the elevator down” is truthful for whatever other financial market and is truthful, especially for cryptocurrencies.

The major differentiating cistron with crypto, however, is volatility. While a sharp daily movement of NASDAQ is considered to exist ane-ii%, Bitcoin, which is considered the virtually stable cryptocurrency and the base asset, can fluctuate more than than 20% daily.

The Psychology of a Market Wheel: Wall St. Cheat Canvas

Karen Bennett, a writer at CheatSheet, created the following chart, showing the psychology of a marketplace bike. Information technology describes the virtually common emotions investors experience as the market fluctuates. These human emotions drive our fiscal markets much more than than the fundamentals.

The 10 Stages of a Market Cycle

These 10 stages repeat over fourth dimension and ascertain a market bike. Not every market cycle will follow this verbal nautical chart and the verbal time it takes.

Nevertheless, it should give some valuable insights into the psychology of marketplace cycles. All markets go through these stages over the short term. The duration and amplitude of these cycles are partially defined by gamble (which is very high for the crypto market). Continue in mind – market cycles are hard to predict.

What nosotros can take away from this is that markets don’t go up indefinitely, simply they likewise don’t autumn to null (assuming they’re legitimate over the long-term). In the past, they’ve e’er “reverted to the mean.”

Stage 1: Hope

‘Hope’ is the first sign of recovery after “the serious disbelief” stage (see Phase 10 – final in the bicycle). The market is showing positive signals for a new bull run. However, investors are nonetheless cautious. Small amounts of coin are being invested.

Stage two: Optimism

Optimism defines the second phase where prices are ascension as new capital flows in. This stage is reached when the market has been in a sustained uptrend for many months. The market has a positive outlook, and therefore many investors are comfortable investing coin at this point.

Stage 3: Belief

Equally time goes by, optimism turns into belief. This stage of ‘belief’ is defined every bit i of the first signs of a bull market. Investors seek new opportunities in the market place.

Stage 4: Thrill

Searching for culling investment options can be a good idea if you know what you are doing. People hands get caught up in feeling thrilled as they select random projects because they believe zippo can go wrong. Everything is running upward.

It is important to go on rails of your excitement level, as being overexcited is a clear sign for closing a position.

Stage v: Euphoria

The end of a huge run-up is divers by euphoria. Homo emotions are taking over, nothing can stop us at present, it’s all rainbows and sunshine. There is only i management – upwards. In this stage of the balderdash run, the “dumb money” jumps on lath, and it’south normally the first to leave. At this stage, expect the press to write virtually the balderdash marketplace, and yous get the “meet the new immature millionaires” manufactures. However, during this fourth dimension, the smart coin is taking profit throughout the parabolic movement.

Phase vi: Self-approbation

At this phase, the bull run is stagnating as people’s lofty expectations are not met. The first signs of a reversing marketplace start to popular up. This is a very dangerous time as people think the self-approbation stage is just a brusk break before the balderdash run continues. Many investors are ill-prepared for the upcoming market place reversal.

Stage seven: Anxiety

Finally, people become aware that this bull run can’t go on forever. They meet the market is reversing, losing value and money. The fear of losing lets traders delay the realization of a loss, which then turns into much greater losses.

Phase 8: Denial

The value of your investments continues to drop, and many people refuse to sell, hoping for an fifty-fifty bigger correction upwards. Investors human action defensively equally they are convinced they take allocated their money wisely. Still, mostly, nigh no coin is able to come out scot-free. When at that place is pelting, everyone gets wet.

Stage 9: Panic

The marketplace continues to decline as the bear market has get a new reality. Investors effort to relieve their funds by desperately selling their investments, equally they are afraid to lose everything. Oft we run into a major sell-off happening at the panic stage.

Stage x: Depression

People lose all hope and their belief in the existing market weather condition. The market is at its lowest signal in the electric current cycle (as will be noticed afterward). This is where stabilization and consolidation outset building again. This stage can accept a very long time.

Market Cycles in Ethereum, Ripple and Other Altcoins

Bitcoin is non the only cryptocurrency that follows certain marketplace cycles. Take a look at the following Ripple chart. You can spot two big market cycles and 2 smaller cycles. This is just office of the “Altcoins flavour.”

This is just one case. We can witness such market cycles in most big-cap altcoins, including Ethereum (ETH), Litecoin (LTC) and Dogecoin (DOGE).

Source: CoinMarketCap

Crypto Cycle Trends: FIAT – Bitcoin – Altcoins and Vice Versa

At that place are 2 major trends we generally come across in a crypto market cycle:

Entry of Liquidity

New FIAT money flows into the crypto markets. Being the get-go and master cryptocurrency, nigh of this coin goes straight into Bitcoin as this is the entry bespeak to the cryptocurrency markets .

The Bitcoin Authority

Judging by the current market cycle (2021), The dominance of Bitcoin started to reject from April 2021 as many investors were looking for new altcoin investments.

This surge of altcoin buying is sometimes an indicator that a market is overbought as investors seek new opportunities, and so potentially indicates the side by side stage of the ongoing market cycle. Let’s take the 2017 cycle as an example: while Bitcoin peaked on December 2017, the “altcoin flavor” took place on January 2018.

The beneath is very well summarized by the prominent cryptocurrency analyst
SecretsOfCrypto.
He outlined the flow of the crowd during a iv-year crypto cycle in this graphic:

Market Cycles: The Best Investing Strategy?

Following the above CheatSheet 10 stages chart, the stage of optimism/belief tin can be seen as the optimal entry point of a new bull market.

“Be fearful when others are greedy and greedy when others are fearful.” said legendary investor Warren Buffett.

In other words, when the market is in a state of disbelief and depression, it might be a good time to consider building upwardly a position, keeping in mind you invest for the long-term and the market might continue declining over the short-term.

On the other mitt, when the market enters the phase of overconfidence and euphoria, it might be time to consider realizing turn a profit.

Sentinel out, because market place cycles practice not ever exactly follow this pattern. In some farthermost situations. It is entirely possible that you enter into a prolonged bear market place where further losses are on the horizon. The other is also true – farthermost euphoria can send the market fifty-fifty college, bravado off the current peaks and skyrocketing even higher.

To avoid getting caught in this whirlwind, always practice meticulous chance management. When it comes to cryptocurrency trading, nosotros’ve prepared a list of xv crypto trading tips that you tin take a look at to optimize your process.