Before we go into Bitcoin analysis, lets first understand what is the market cycle according to the Wall Street Cheat Sheet (for those new in crypto) and the emotional reactions related to each phase of this cycle.
What is the Market Cycle?
The market cycle is the long term price movements in a broader market index, including a complete uptrend followed by a complete downtrend.
Understanding the market cycle helps to maximize profits.
The Market Cycle Psychology
In a bull market, everybody thinks that he is a god in trading because everything goes according to the plan, but when the things start to go wrong, fear and panic prevails. It is good to be aware of all these emotions that affect the trader or investor mindset.
First Phase: Optimism, belief, thrill, and euphoria
This phase starts with Optimism and as the market follows the trader will, it evolves becoming euphoria. A trader experiences euphoria at the top of the market.
Second Phase: Complacency, denial, and hope
This phase starts when the market starts to go down and not meeting the trader expectations anymore. On this phase, a trader tends to think that this is just a market cool down, and while the drop continues his emotions are mixed with anxiety and hope.
Third Phase: Panic, capitulation, anger, and depression
This is the phase when the trader sees clearly the bear market and becomes desperate.
And while at the bottom a common investor fails to understand that this is the point of maximum financial opportunity in the market cycle.
Phase 4: Disbelief
In the fourth and last phase of the market cycle, investors tend to have skepticism. If the market makes a move up they wonder if the upside will last.
Now, let see what happened the last months. On 15 December 2018 bitcoin price hit $3,217 which is the lowest point in the bear market that started after hitting the ATH on December 2017. After this, we have seen higher lows as shown in the chart below.
Yesterday bitcoin price surged by $1,000 in an hour and seems that nobody knows what happened. 7bitcoins.com reported on 31 March, (one day before the big green candle) that bitcoin is going to move a $1,000 candle to the upside. While everybody on crypto twitter is trying to find the reason for this big price movement, $400 million got Rekt on Bitmex and nobody seems to have the guts to short bitcoin anymore, an interesting thing happens. Bloomberg posts a tweet showing their disbelief about the move to the upside.
The rally that sent Bitcoin to its highest level since November lasted 60 minutes and may have started with an April Fool’s joke 👀 https://t.co/SvHxazFtyR
— Bloomberg Crypto (@crypto) April 2, 2019
This confirms more that we are on the disbelief phase when as we said above investors tend to be skeptical if the price growth will last.
What is your thought about the bitcoin market cycle? At which point do you think we actually are on the Wall Street Cheat Sheet we actually are. Feel free to post your thoughts on the comments below.