In this article I’ll cover:
• What is a cycle, how and why it works
• Different phases of the cycle
• How to use knowledge about cycles

All markets, including crypto, go through the same phases and are cyclical. They rise, peak, dip, and then bottom out. Market cycles are specific patterns that typically emerge from the psychology of market participants and the greater economic environment.

Accumulation is the first phase of every market cycle. It starts after the end of the previous cycle when sellers have exited the market and prices are perceived to begin stabilising. 

In this phase, the market volume is typically lower than average, as interest in the market remains low. Therefore, no clear trend emerges, and assets typically trade within a tight range. 

Characteristics:

·      Market sentiment is dominated by disbelief and uncertainty

·      Low price volatility

·      Low trading volume

This period is especially attractive for long-term users who are looking to buy and hold.

Commonly referred to as the bull market phase, the markup phase is when the market moves higher in price at an increasing rate. During the markup phase, new groups of market participants enter the market, and with that generally comes a notable increase in volume at the beginning of this phase. 

From a market sentiment standpoint, despite still being cautious, market participants start becoming optimistic about the outlook, as companies and the press begin publishing positive headlines. 

The demand for an asset begins to outweigh the supply, causing prices to appreciate in value as a result. 

Characteristics:

·      Market sentiment is dominated by optimism and excitement

·      An uptrending price chart

·      Increase in trading volume

·      Favourable economic conditions

At some point, after a bull run, some buyers become sellers. This is the distribution phase, where the buyers and sellers in the market are at equilibrium. 

On one side, there are market participants who are still looking to buy, as they have confidence that the bull market is not over. On the other side are sellers, who are looking to lock in their profits. While this phase of the market still sees high trading volume, asset prices generally fluctuate within a limited range until either the bulls or bears surrender.  

Characteristics:

·      Market sentiment is simultaneously coloured by overconfidence, greed, and uncertainty

·      Low price volatility

·      Elevated trading volume, but without an increase in price

The markdown phase, or the bear market, is the scariest phase for most market participants. It starts as soon as the supply exceeds the demand in the distribution phase and is a period that’s fuelled by fear in the market, as the outlook becomes increasingly negative. 

The more that participants begin fearing the upcoming state of the market, the more the selling pressure builds. In some situations, this cascading effect can send the prices of an asset to levels not seen since the markup phase. 

From a technical perspective, the markdown phase is defined by a downtrending chart and a high volume price decline. From a market sentiment perspective, it begins when news articles turn negative, with words like ‘recession’ in their title. 

Characteristics:

·      Market sentiment is dominated by anxiety and panic

·      Downtrending price chart

·      Elevated trading volume

·      Unfavourable economic conditions

So to summarize The study of investment cycles will give investors a heads-up on trending conditions for a stock, whether sideways, up or down. This allows the investor to plan a strategy for profit that takes advantage of what the price is doing. The entire cycle can repeat or not. It is not necessary to predict it, but it is necessary to have the right strategy.

Subscribe and never miss a beat! Stay updated with the latest insights, tips, and tricks to supercharge your knowledge and stay ahead in the game!

In this article I’ll cover:
• What is a cycle, how and why it works
• Different phases of the cycle
• How to use knowledge about cycles

All markets, including crypto, go through the same phases and are cyclical. They rise, peak, dip, and then bottom out. Market cycles are specific patterns that typically emerge from the psychology of market participants and the greater economic environment.

Accumulation is the first phase of every market cycle. It starts after the end of the previous cycle when sellers have exited the market and prices are perceived to begin stabilising. 

In this phase, the market volume is typically lower than average, as interest in the market remains low. Therefore, no clear trend emerges, and assets typically trade within a tight range. 

Characteristics:

·      Market sentiment is dominated by disbelief and uncertainty

·      Low price volatility

·      Low trading volume

This period is especially attractive for long-term users who are looking to buy and hold.

Commonly referred to as the bull market phase, the markup phase is when the market moves higher in price at an increasing rate. During the markup phase, new groups of market participants enter the market, and with that generally comes a notable increase in volume at the beginning of this phase. 

From a market sentiment standpoint, despite still being cautious, market participants start becoming optimistic about the outlook, as companies and the press begin publishing positive headlines. 

The demand for an asset begins to outweigh the supply, causing prices to appreciate in value as a result. 

Characteristics:

·      Market sentiment is dominated by optimism and excitement

·      An uptrending price chart

·      Increase in trading volume

·      Favourable economic conditions

At some point, after a bull run, some buyers become sellers. This is the distribution phase, where the buyers and sellers in the market are at equilibrium. 

On one side, there are market participants who are still looking to buy, as they have confidence that the bull market is not over. On the other side are sellers, who are looking to lock in their profits. While this phase of the market still sees high trading volume, asset prices generally fluctuate within a limited range until either the bulls or bears surrender.  

Characteristics:

·      Market sentiment is simultaneously coloured by overconfidence, greed, and uncertainty

·      Low price volatility

·      Elevated trading volume, but without an increase in price

The markdown phase, or the bear market, is the scariest phase for most market participants. It starts as soon as the supply exceeds the demand in the distribution phase and is a period that’s fuelled by fear in the market, as the outlook becomes increasingly negative. 

The more that participants begin fearing the upcoming state of the market, the more the selling pressure builds. In some situations, this cascading effect can send the prices of an asset to levels not seen since the markup phase. 

From a technical perspective, the markdown phase is defined by a downtrending chart and a high volume price decline. From a market sentiment perspective, it begins when news articles turn negative, with words like ‘recession’ in their title. 

Characteristics:

·      Market sentiment is dominated by anxiety and panic

·      Downtrending price chart

·      Elevated trading volume

·      Unfavourable economic conditions

So to summarize The study of investment cycles will give investors a heads-up on trending conditions for a stock, whether sideways, up or down. This allows the investor to plan a strategy for profit that takes advantage of what the price is doing. The entire cycle can repeat or not. It is not necessary to predict it, but it is necessary to have the right strategy.

Subscribe and never miss a beat! Stay updated with the latest insights, tips, and tricks to supercharge your knowledge and stay ahead in the game!