The history of the cryptocurrency market shows a clear truth: bull cycles usually repeat every four years. This has been proven in many previous cycles. However, despite understanding this cycle, many investors still end up losing money. So, why do investors lose money despite knowing about this cycle? Let's take a look at the main factors.
1. The Structure of a Crypto Bull Cycle
A cryptocurrency bull market cycle typically lasts about 4 years. The first 3 years are a bear market, and the last year is a bull market. This is evident from previous cycles:
2014-2018 cycle: Bear market lasted 177 weeks, bull market lasted 34 weeks, total of 211 weeks (about 4 years and 2 weeks).
2018-2022 cycle: Bear market lasts 157 weeks, bull market lasts 47 weeks, total of 204 weeks (about 3 years and 11 months).
Cycle 2022-2026: As of now, the ATH (highest price) of the cycle has not been broken, indicating that technically we are still in a bear market.
This is the general structure that most crypto cycles follow. However, understanding this structure does not mean that investors will easily make profits. Market psychology and the ability to handle emotions are the factors that greatly influence the success or failure of investors.
2. The Psychology of a Market Cycle
The cryptocurrency bull cycle is not just about price increases and decreases, but also a roller coaster of emotions. These emotions can be divided into three main phases: the Red Phase, the Yellow Phase, and the Green Phase.
🟥 Red Stage: Confusion and surrender
This is the stage after reaching the ATH. Usually, when the price reaches a new peak, many people think that the market will continue to rise. However, the price starts to fall sharply soon after:
Complacent: Investors think that prices will recover soon and this is just a correction.
Anxiety and Denial: As prices continue to fall, they become anxious, but still refuse to sell in the hope of a new price increase.
Panic: As the market falls further, they start panicking because of the huge losses.
Surrender: When the market falls too far, investors decide to sell at a large loss and leave the market.
🟨 Golden Stage: Accumulating and building hope
This phase occurs when prices have fallen sharply and begin to trade sideways. This is when the market consolidates and investors are faced with feelings of disappointment and disbelief:
Anger and Depression: After losing a lot of money in the previous stage, the investor feels depressed and angry with the previous decision.
No Confidence: When prices start to recover slightly, investors still do not believe that the market will rise again.
Hope: After the market showed more positive signals, investors began to hope for a new bullish cycle.
🟩 Green Phase: Confidence and excitement
This is when the market breaks the previous ATH, leading to a new bull run. At this point, investors easily fall into a state of overconfidence:
Optimism and Confidence: Investors believe that the market will continue to rise, giving them the confidence to re-enter.
Euphoria and Euphoria: As prices continue to rise rapidly, many people feel they are on a great roll and continue to pump capital into the market.
End of cycle: At this point, if investors do not sell at the right time, they can easily return to the Red phase when the market starts to decline again.
3. Combining cyclical structural factors and market psychology
Overall, the cyclical structure and market psychology show the main reasons why investors easily lose money in crypto, even when they understand the cycles. Here are the main reasons:
Impatient and unaware of the current phase: When the market peaks and starts to decline, many people are unaware that they are in the Red phase and continue to hold their positions instead of selling.
Psychological impact and lack of discipline: Overconfidence in the Green phase and panic and surrender in the Red phase make investors lose investment discipline.
No clear exit plan: Lack of an exit plan, especially during market peaks, causes investors to fail to sell at the right time and miss out on the opportunity to take profits.
Conclude
Understanding the cyclical structure and psychology of the market is only part of the equation. To be successful in the cryptocurrency market, investors need to control their emotions, stick to their strategies, and know when to exit. Only then can we avoid unnecessary losses and maintain profits during the next cryptocurrency bull cycle.