The investor emotion cycle
You probably know this graph for investor emotion cycle with the four stages of the bull market with optimism, excitement, thrill and finally euphoria and the six stages of the bear market with anxiety, denial, fear, desperation, panic and capitulation.
The trend reversal of the market takes place somewhere inbetween euphoria and anxiety. So if we are able to determine where we are in the cycle then we have an indication of when the reversal will happen. Of course this is not the only indicator but this is one of them.
So where are we now, on the 17th of april 2021 ? From my point of view, optimism and excitement are behind us. We are probably somewhere near the end of the thrill phase. I don’t think that the euphoria has started yet. It will probably start with the next big BTC move.
The google trend indicator
The euphoria phase is when we believe that everything we touch turns to gold1, that we cannot make mistake and when we see insane returns. That’s when mainstream media talk about bitcoin, when people talk bitcoin at the coffee machine and when retail newcomers buy BTC. And there is a good measure of this « crypto going mainstream » phase : that’s the level of crypto search on google. Google trends is an intersting tool to measure the level of interest for crypto.
If we look at a five year window we can see the surge in google search in accordance with the end of the bull market at the end of 2017 and also at the end of spring 2019 (see graph below).
Where are we now ?
So what is the situation now : we can see that we have a drop in the number of search on Google. This will probalby make it easy to detect the start of the euphoria phase. That’s why, among other informations, I will carefully monitor the next rise of the searches in google trend in order to prepare my exit of the market. Before the end of the euphoria phase, before the start of the bear market.
I am interested to know what you think.
1Sometime soon this expression will become « everything we touch turns to BTC »