The crypto market follows a recurring cycle every four years. Yet, many still fall into the same traps, losing money despite understanding these cycles. Let’s explore why.
1. Understanding the 4-Year Crypto Cycle
A typical crypto bull run cycle spans around four years, with the majority of this time in a bear market, followed by a shorter bull run phase. Here’s how the past cycles have shaped up:
2014-2018 Cycle:
Bear Market: 177 weeks
Bull Market: 34 weeks
Total: ~4 years
2018-2022 Cycle:
Bear Market: 157 weeks
Bull Market: 47 weeks
Total: ~4 years
2022-2026 Cycle:
Currently, the market has yet to hit a new all-time high, suggesting we’re still in bear territory.
2. Emotions in the Market Cycle
The crypto market cycle isn’t just financial—it’s highly emotional. Investors go through phases:
Red Phase: Following a peak, emotions swing from complacency and anxiety to outright panic as prices drop, leading to hasty exits.
Yellow Phase: As the market stabilizes, emotions shift to anger and depression, with disbelief lingering even as prices start to rise.
Green Phase: Optimism turns to thrill and euphoria when the market rallies, but these emotions often lead investors to hold on too long, missing the peak.
3. Combining the Cycle and Emotions: The Perfect Storm
Here’s why people lose money despite knowing the market cycle:
Red Phase Reaction: After reaching a peak, investors assume the first dip is temporary. As prices fall, they move from denial to panic, ultimately selling at significant losses.
Yellow Phase Trap: Prices stabilize, but disillusioned investors struggle to re-enter. As the market begins to climb again, disbelief gives way to hope too late in the cycle.
Green Phase Frenzy: Once the market breaks its previous highs, excitement grows. Investors buy in, often at inflated prices, as thrill turns to euphoria. However, failing to time the peak, they hold on too long, eventually seeing the cycle repeat.
Ultimately, combining these market phases with the emotional rollercoaster leaves many investors holding onto losses. Understanding both the technical and emotional patterns in the market can be essential to avoiding these common mistakes.
