Cryptocurrency market cycle, just as any other financial market, defined by its phases. Knowing these phases’ timeline and being good at predicting them will help an investor or trader to find the best time to buy or sell, which will increase profits and cut unnecessary losses.
These cycles emerge mostly because of the participants’ emotions and expectations coming from a greater financial environment, like the world financial crisis, for example.
These cycles begin with little interest in the crypto market, meaning the time when people almost lost interest in it. Then, when the interest rises, the cycle slowly moves to its pinpoint, then slowly declines, shifting to the next cycle. Even though it can be hard to identify the start and the end of the cryptocurrency market cycle, most cryptocurrencies, except for stablecoins, follow the same scenario.
The cryptocurrency market cycle consists of the four main phases — accumulation, run-up, distribution and run-down. Today we will discuss the characteristics of the cycle phases to learn how to find the most appropriate time to enter and exit the market without losing initial investments.
The accumulation phase usually signifies the start of the new cycle, or the end of the previous one.
In case it’s the end of the previous cycle, it means that the market reached its bottom and the price won’t go any lower. This is the moment when people start buying, considering that the worst is over. The mood in the market shifts from negative to neutral.
In the accumulation phase, the market volume is also lower than average as there is not much interest in the market. This market cycle phase has the following characteristics:
-The market participants’ mood is driven by uncertainty, but slowly changing from negative to neutral;
-Low asset price volatility
-Low trading volume
This is the perfect period to enter the market and “buy the dip”. The accumulation phase means that there will soon be the run-up phase, bull market, which means that the asset price will start increasing. However, investors must be patient and wait until they’re absolutely certain that the market cycle phase can be identified as the phase of accumulation.
The best way to get ready for the upcoming accumulation phase is to start working with cryptocurrency right now. If you’re a business owner, accepting cryptocurrency for your business can help you not only acquire some crypto, but also grow your business. By expanding your client base, cutting costs on fees and optimizing your bookkeeping, your business will get a significant boost. Start with integrating the Plisio cryptocurrency gateway. Not only will you find no trouble integrating the Plisio API that supports up to 12 e-commerce plugins, you will also start accepting 18 available cryptocurrencies with the lowest fees on the market starting with only 0.5%.
Run-Up Phase (Bull Market)
The Bull Market phase means there is more and more interest in the asset. The majority of investors start entering the market, pushing the asset price higher and higher. In this phase, the market direction is absolutely clear and the participants’ mood has shifted from neutral to positive.
The price reaches its top, usually being all time high, and slowly leads to the next cycle phase, which is the distribution phase.
During the run-up phase, a lot of new players enter the market, which can be mostly weak hands. Weak hands are those people who’re driven by the mass media manipulation and want to play short-term, fixing the profits as soon as possible.
The Bull Run phase has the following characteristics:
-Market participants’ mood is driven by excitement and optimism
-High trading volume
-Favorable world’s financial state
The beginning of this phase is a good time to enter the market. However, if investors enter the market at the end of the run-up phase, they won’t be in time to fix the maximum profit. It is important to distinguish the end of the Bull Run that means that the market cycle is slowly shifting towards the next phase, which is the distribution phase.
During this market phase, sellers start dominating the market. The rice tendency is mostly volatile, as well the market participants’ mood is mixed.
In the distribution phase, the market starts moving in the opposite direction. Greed overcomes patience, with people selling their assets to gain any profit at this point, as they’re scared the price will go down in the nearest future.
The tension between investors starts to grow. There are two types of investors — those who are sure that the run-up phase is not over yet, and those who are eager to lock in their profits. This usually leads to the negative market sentiment, when there is still high trading volume, but the asset price starts crashing.
The distribution phase characteristics:
-Market participants’ mood is mixed, as there are tension between Bulls and Bears
-The price begins to fluctuate
-Trading volume is still high
During this phase, Bears usually win and the market is slowly shifting towards the next cycle phase — the run-down phase.
Run-Down Phase (Bear Market)
This is the last phase of the cryptocurrency market cycle. This period can be marked as the most difficult on the emotional side. During this phase, investors lose their faith in the market, with the mass media spreading disbeliefs that the price is most likely to never come up again.
Sadly, every cycle has its end. The run-down will always follow the Bull Run phase and it is vital to understand that before entering the market. For many inexperienced investors, the Bear Market phase has always been a hard lesson to learn as some of them choose to hold their assets before the next run-up stage, reducing their ROI several times.
The Bear Market characteristics:
-Significant price drop
-Trading volume going down
-The market participants’ mood switching from mixed to negative
What is the cycle’s timeframe?
Usually, the whole cycle lasts from 6 to 12 months. But before the market shifts to another cycle, it may take years to happen.
The cryptocurrency market is relatively young in comparison to fiat financial assets. No one knows what the biggest run-up is going to be. One of the most prominent run-ups happened in 2017, when the price went from $3,000 to $20,000. And another time in 2021, the price skyrocketed from $10,000 to $69,000.
Understanding these cycles is vital for successful crypto investments. When an investor knows when to enter the market, and when they are not driven by the media bias or emotions, they are more likely to run a good investment strategy and greatly multiply their investments.
Is it time to buy?
At the moment, the market cycle is mostly unsure. However, the accumulation phase is very close, which means that it is a good time to get involved in cryptocurrency.
If you don’t wish to buy crypto, you start accepting it for your goods or services. The good place to start is to integrate a cryptocurrency payment gateway to your website. The Plisio platform is very beginner-friendly, as it has one of the lowest fees on the market, plenty of useful business tools and free cryptocurrency wallet to hold your crypto until the accumulation phase. Easily integrate the Plisio API into your website and start accepting 18 most popular cryptocurrencies right now — the accumulation phase is nigh.
Please note that Plisio also offers you:
- Zen Cart
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- Dash (DASH)
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