Despite understanding that the cryptocurrency market operates in cycles, many investors still experience significant losses. Let’s examine the key reasons why this happens by looking closely at both the structure of crypto cycles and the psychological traps along the way.
The Structure of Crypto Cycles: A Four-Year Pattern Historically, the crypto market follows a four-year cycle, with three years dominated by a bear market and one year of an intense bull run. This pattern has proven itself in previous cycles:
2014-2018
Bear Phase: 177 weeks
Bull Phase: 34 weeks
Total: 211 weeks
2018-2022
Bear Phase: 157 weeks
Bull Phase: 47 weeks
Total: 204 weeks
For the 2022-2026 cycle, we remain in a bear market since no new all-time high has been set or sustained, signaling we’re not yet in the anticipated bull phase.
Emotional Phases in Market Cycles Market psychology follows this cyclical nature, often guiding investors through various emotional phases that can cloud judgment. After reaching a new peak, prices typically decline, sparking feelings of complacency, anxiety, denial, and, eventually, panic. As prices stabilize in a sideways market, many experience anger, frustration, and disbelief, often missing early signs of recovery. In the final green phase, euphoria and overconfidence take hold as prices surge past the previous highs, leading investors back into the market—only to repeat the cycle.
Combining Cycles and Psychology: The Core of Losses When investors align their decisions purely with the cyclical structure but ignore emotional dynamics, losses are inevitable. In the red phase, complacency during initial pullbacks often leads to panic selling. In the yellow phase, disbelief prevents reentry as the market begins to recover, leaving potential gains on the table. Finally, the green phase brings renewed confidence and thrill as prices soar, encouraging risky trades and missed profit-taking. The result? Investors become trapped in a repetitive cycle, often leaving the market with less than they started. This understanding highlights the importance of both recognizing cycles and managing emotional reactions to avoid repeating costly mistakes.
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