WHY MANY PEOPLE LOSE MONEY IN CRYPTO?

Many people lose money in crypto due to the emotional and psychological dynamics of market cycles, despite understanding that crypto bull runs typically occur every four years. Here’s a breakdown of why this happens:

1. Anatomy of a Bullrun Cycle:

Bullrun cycles last about four years. The bear market dominates the first three years, followed by a short bull run in the final year.

Past cycles (2014-2018 and 2018-2022) show bear markets lasting over 150 weeks and bull markets around 40 weeks.

Many fail to time these cycles correctly, entering during the bull run and missing the early accumulation phase.

2. Psychological Phases:

Red Phase (After ATH): After a peak, emotions like complacency, denial, and panic drive poor decisions. People expect a pullback rather than a bear market and hold on, leading to massive losses when prices drop dramatically.

Yellow Phase (Sideways Market): After suffering losses, emotions like anger, depression, and disbelief prevent people from reentering when the market is bottoming out.

Green Phase (New ATH): When prices rally past the previous all-time high (ATH), optimism and euphoria return, prompting people to buy back in at inflated prices, often right before another downturn.

3. Combining Market Anatomy and Psychology:

The pattern repeats because emotions cloud judgment. People tend to buy during euphoric highs and sell during panicked lows, which is the opposite of a rational strategy. They often don’t sell during bull runs and then panic when the bear market begins, locking in losses instead of profits.

In summary, understanding market cycles is not enough. Emotional discipline and timing are crucial, but difficult to master, leading to widespread losses despite the predictability of bull and bear cycles.

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