Bitcoin Cycle

The Bitcoin cycle refers to the recurring phases of bull and bear markets that Bitcoin goes through. These cycles are tied to Bitcoin halving events, where the reward for mining Bitcoin is halved, reducing the rate of new supply. The halving roughly occurs every 4 years.

Bitcoin Halving Countdown

The Phases of the Bitcoin Cycle

1. 1. Accumulation Phase: This is the phase following a bear market when prices have stabilized and long-term investors start buying again. Market sentiment is generally cautious, with low trading volumes and minimal price action.
2. 2. Uptrend/Bull Market: During this phase, prices start rising as more investors enter the market. Demand increases, often driven by retail and institutional investors, leading to large price gains. This phase often coincides with increased media coverage and hype around Bitcoin and cryptocurrencies.
3. 3. Euphoria/Market Peak: At this stage, prices move parabolic. Market sentiment is overwhelmingly positive, and there is significant media attention. Many new investors enter the market, often driven by fear of missing out (FOMO).
4. 4. Downtrend/Bear Market: Following the peak, a sharp decline in prices occurs as early investors take profits. Panic selling ensues, and the market enters a bear phase. Prices can drop significantly, and sentiment turns negative. This phase can last several months to years.
5. 5. Bottom/Capitulation: The final stage of the cycle is marked by extreme pessimism, with many investors giving up or selling at a loss. Prices stabilize at the bottom, setting the stage for the next accumulation phase.

With the regular chart, the parabolic move is way more noticeable.

Recognizing where we are in the market cycle can help you time your entries and exits more effectively, while also managing risk during volatile periods. Of course, this is easier said than done.

Cycle of Emotions

There is also a cycle of emotions people go through during a market cycle:

Anger → Depression → Disbelief → Hope → Optimism → Belief → Thrill → Euphoria → Complacency → Anxiety → Denial → Panic → Capitulation → Anger

This is very granular. Focus on the strongest emotions: depression, euphoria, panic, and capitulation.

You might have heard that traders and investors should be emotionless. While it's true that traders should avoid making decisions based on emotions, it's unrealistic to completely detach from feelings. Decisions should always be based on information and analysis.

However, I guarantee you'll feel something when your portfolio drops 20% in a day for the first time. Becoming emotionally detached is a process that takes time.

If you feel euphoric or panicked, you can use these emotions as indicators. It's likely you're not the only one feeling this way. Be aware of what's happening around you. Are more people talking about crypto? Are people who never showed interest suddenly jumping into the conversation?

In late 2017, when I started my crypto journey, I noticed YouTubers shifting their content from their usual topics to crypto. They were recommending buying, no matter what. If prices dropped, it was considered a dip-buying opportunity. If crypto surged 10%, they said it was the last chance to buy before prices skyrocketed even higher. Market sentiment was absolutely euphoric.

In hindsight, everything seems obvious, but it's tough to time the market correctly. Euphoria and hype can last longer than you might expect.