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The Market Cycles of Bitcoin

Market cycle

September 7, 2020 | 

3170 Views | 

JOHN K MWANIKI | 

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Volatility is one of the top Bitcoin features. Since its inception, the coin has been on a high and low run ever. Even though some investors predict stability in the long run, it is yet to reach such stages.

Lack of careful consideration can make one believe such runs are coincidental. Yet, there is a specific market cycle the coin development goes through. The cycle is all about the highs, lows, and everything in-between. This article looks into everything about the Bitcoin market cycle. 

By the end, you should be able to understand how the market cycle operates. You will know the stages of the market cycle and also how to capitalize.

Let's get to it; 

Bitcoin Market Cycle and Halving 

Bitcoin halving has proven to be one of the most important crypto events. The event disrupts the market by reducing the market supply. The reduction in supply with a similar demand leads to an increase in price. However, it doesn't happen immediately. 

The space between the consecutive bitcoin halvings is the start and the end of every market cycle. Most of the traders take time to note a change in the reduction of Bitcoin after the halving. 

The traders tend to get the coins through the crypto exchanges and other purchases.

After some time, the supply reduces all over. By then, the prices start shooting with the traders hoping to make the most out of the coin. The trends continue until it peaks in the resistance. The resistance level is where the coin stabilizes. If the demand keeps on, then the value shoots further. Past this level, it won't slow until the peak. 

One of the memorable Bitcoin market cycles followed the 2016 halving. The coin took a growth pattern to hit some of the highest. By the end of 2018, it was trading at around $20k. 

2020 Bitcoin Halving 

Bitcoin went on a downward spiral after the 2018 bull run. It reached the lows of $3k by March of 2020. 

Most people attribute the drop to the effects of the coronavirus pandemic. Yet, it is still part of the market. The cycle takes into account all the external factors likely to impact the coin. Whatever happens, the coin must keep its shape through the cycle. 

The coin has had a great run to reach impressive figures of over $12k. It has, in the process, gone past the resistance levels of $10k. Still, these are the earlier days after the May halving. If the market cycle is anything to go by, the coin will surpass $20K.

Buying Bitcoin from one halving, then selling at the other, is profitable. The next halving of the coin always starts at higher values than the previous one. Anyone who doesn't want to go through the cycle can use that. For example, the 2020 halving was at $9k different from 2016 at $664. 

What Happens When the Halving Ends? 

While halving is the moving force behind the cycle, it won't last forever. Bitcoin has a supply limit of 21 million. Currently, around 18.5 million of the coins are already mined. Meaning there comes a time halving won't happen again. For now, it is some years away. It would be at some stage around 2140. 

Most projections show that Bitcoin would have stabilized by then. The more the mining reward goes down, the less lucrative it becomes. Miners, however, are essential for the security of the blockchain. They verify every transaction to avoid fraud. 

To continue working on the blockchain, the traders will find other rewards. The most probable is the transaction fees. With miners relying on fees, there would be no curated reduction of supply. The bitcoin market cycle would be like fiat currencies. 

Stages of a Market Cycle 

  • Disbelief – Disbelief is the first stage after the total decline of a market. With no emotions left, traders don't imagine the market can bounce back. Most are designed to fate after losing investments. 

  • Hope – after some time of extended growth, the traders open up to an upturn. They start believing in an oncoming bull-run. They are, however, still not willing to go big. 

  • Optimism – sustained market rise for months increases the trader's trust. They start investing more comfortably on the asset. The asset attracts several investors leading to immense capital. 

  • Belief – the traders start accepting the possibility of a bull run. The market expands as investors seek new opportunities. 

  • Thrill – at this point, the traders are entirely invested in the asset. The bull run has stayed for some time, and it looks like nothing can go wrong. This is the best time to look for alternative investments. However, most traders don't expect anything to go wrong. 

  • Euphoria – the sustained bull run is reaching its peak. This is the point where everyone wants a piece of the asset. The press is getting worked up just like other investors. It is where most money gets into the cycle. Some people would even leave other assets to get to this. 

  • Complacency – the first signs of a stop in the bull run shows. Most traders, however, are too invested to believe any other possibility except a rise. They end up assuming that it is a slow run before the rise gets back to normal. 

  • Anxiety – this is the point when the realization that at some point, prices will go down. A small downturn on the value marks it. However, traders are not letting go. They can hold on as the reductions are on a low scale. 

  • Denial – the traders have already sensed the effects of the downturn. The assets are dropping rapidly. The traders are, however, still hoping for a market correction. They tend to believe they cannot be on the wrong side of the market.  

  • Panic – after denying the market situation for someone, the traders suddenly open up to reality. The bear run is the reality, and losses are unavoidable. The traders don't want to lose everything. They end up selling out of fear. 

  • Capitulation – not everyone sells at panic. Some tend to believe the market can still salvage. After some time, they realize they lose a lot while holding the coins for longer. They sell, thinking its now a free fall.

  • Depression – at this point, the traders don't care about the markets anymore. They have lost all hopes in the markets. However, it is also the point the market starts to rebuild to start from stage 1. The Depression stage might last for an extended period. 

The whole system can be summarized in short as accumulation, greed, distribution, fear, repeat. The duration of the cycles is not any important. Whether it runs for weeks, months, or several years, the cycle remains the same. 

Bitcoin currently seems to be on the belief market cycle stage. Most traders didn't imagine it would run against the falling traditional economy. After a sustained value increase, they started hoping it beats the slump. Afterwards, they wanted it as the best alternative investment. For now, they trust the coin would bounce from any market issue. 

How to Capitalize on the Market Cycles  

Understanding the market cycles is just half of what you need for successful crypto trading. You need more to learn crypto investments. The first hurdle is emotional control. You are human and falling to the pressure is part of you. You will always have the urge to move with the masses. 

The whale traders have mastered the art of using emotions. They can create a market decline which the other traders follow. They end up buying the assets at lower prices for accumulation. The market cycle helps you rely on data rather than emotions. Stable emotions also help to stay calm even when on the losing end. 

Once you master the emotions, the second step is to learn more. Consider learning from the other successful traders—research more about the market movements from other research and studies. 

Remember, market cycles can end. Not every asset stays up forever. Some diminish never to make a return to the market. You have to know whether the market is on the cycle or ending. 2014 – 2015 had mainly been so slow for Bitcoin. It seemed like it was headed to the deathbed. 

Such long slow times are quite hard to distinguish. It takes a little bit of craziness to keep assets when every signal indicates a lull. Still, in Bitcoin's case, it seems the crazy ones gained more than any other group. 

Bottom Line 

Understanding the bitcoin market cycle is a must for any serious trader. You have to analyze the market to determine the perfect time to buy or sell the coin. 

However, market cycles in itself are not enough. It would help if you had other tools like technical analysis to understand the real market state. The right tools are the best for successful trading. 

All of these summarizes as; buy low, sell high. 

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COMMENTS (1)

batholomew brown  batholomew brown . I’m a bitcoin trader and the time I’m writing this blog I can’t find a single review about many bitcoin trading signal services and companies. I have lost lots of money testing them for over an year. I don’t want you to be scammed too.   1 year ago from Canada

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