The cryptocurrency market is a fascinating space, with explosive bull cycles every four years attracting a lot of participants. However, these cycles also create numerous challenges, leading to huge losses for those who are not prepared. Let’s dive into each aspect to better understand why many investors fail despite understanding the market patterns.
1. Crypto Bull Cycle: Understanding Market Dynamics
The crypto market typically follows a four-year cycle, with most of the time spent in a bear market (declining prices), followed by a short but strong rally. Looking back at recent cycles:
Cycle 2014-2018:
Bear Market: 177 weeks – Prolonged period of decline, many investors give up.
Bull Run: 34 weeks – Price increases rapidly, making a new high.
Total: 211 weeks (about 4 years and 2 weeks).
Cycle 2018-2022:
Bear Market: 157 weeks – Market declines sharply after a previous rally.
Bull Run: 47 weeks – Price rebounds, giving hope to investors.
Total: 204 weeks (about 3 years, 11 months).
Cycle 2022-2026: Currently, we have not seen a new high (ATH), which means the market is in a bear phase, waiting for a recovery.
2. Psychological Fluctuations Through Market Phases
More than just dry numbers, crypto market cycles are also associated with strong emotional waves, from euphoria to panic. The different stages of the market cycle have a profound impact on investor psychology:
🟥 Red Phase: Infatuation After ATH
Popular sentiment: Overly optimistic.
What Happens: After hitting a new all-time high (ATH), the market begins to decline. Many investors believe that this is just a temporary correction and continue to hold assets. As prices fall further, anxiety gradually takes over, but confidence in a recovery remains. When the market drops to 90% of its value, many people panic sell, accepting huge losses.
Result: Most investors sell at the bottom, after suffering heavy losses, usually in the capitulation stage.
🟨 Golden Phase: Recovery and Hesitation
Common sentiment: Skeptical and reserved.
Symptoms: The market stabilizes, but the memories of losses linger. Many investors feel angry about losing money, but still wait for a clear sign of recovery. When prices start to rise slightly, hope returns, but doubts remain. Investors often miss the first gains because they are too cautious.
Result: Some people re-enter the market too late, missing out on the initial upside.
🟩 Green Phase: Return to Excitement
Popular sentiment: Extremely excited and optimistic.
What Happens: Price breaks above previous ATH, creating widespread euphoria. New investors enter, while those who have left the market return with the belief that this time is different. People rush to buy, confident that prices will continue to rise forever. However, without an exit plan, the next drop can cause huge losses.
Result: Many investors cannot withdraw profits in time and suffer losses in the next price drop.
3. The Combination of Market Cycles and Human Psychology
When market cycles combine with human psychology, it creates a "perfect storm" that causes many people to lose money despite their knowledge of the market:
Red Phase: After reaching the ATH peak, investors feel invincible. However, as prices start to fall, fear gradually increases. They hold on in hope, but eventually sell off in panic, incurring heavy losses.
Golden Phase: The market stops, no longer fluctuates strongly. Investors' psychology becomes uncertain: they feel regret for selling earlier and anger for missing the opportunity. When prices rise, hope returns, but entering too late prevents them from taking full advantage of the opportunity.
Green Phase: Each new peak brings euphoria. Investors believe they have it all under control, and this euphoria clouds their judgment. When the next cycle begins, they are caught in the same old rut, unprepared for another downturn.
4. How to Succeed in the Crypto Market?
Many people fail in crypto because they get caught up in the emotional roller coaster, buying at the top and selling at the bottom. To be truly successful, it is important not only to understand the market patterns but also to have a clear strategy:
Define Goals: Set clear goals for returns and acceptable risk levels.
Clear Plan: Plan when to buy, when to sell and stick to it strictly, regardless of emotions.
Control Your Emotions: Don't let your emotions rule you. Be prepared for up and down cycles, and avoid falling into the trap of greed or fear.
Patience: Crypto is a long-term game. Don't rush into short-term gains and lose sight of your long-term plan.
Conclude
To not lose money in the crypto market, knowledge is important, but emotional management and an investment plan are even more important. Up and down cycles are inevitable, but with strategy and patience, you can turn them to your advantage.