The crypto market follows a cycle comprising four phases. Although there are many different cryptocurrencies, Bitcoin and Ethereum are commonly used to determine the state of the overall market, since when these currencies grow or crash, they take the market with them.
The market seems to be experiencing a phase of growth (the uptrend phase); however, investors are wondering when this bullish phase will end, and when profits should be locked in. Fortunately, there are some ways to determine the current market, and make smart decisions to avoid losing assets.
What Is The Crypto Market Cycle?
Crypto cycles refer to recurring patterns of price behavior in the crypto market. These are characterised by periods of growth and depreciation. The cycle results from external factors, like market sentiment and news headlines, which impact selling, buying, and holding activity. Cycles are also impacted by technological developments, regulatory changes, and the movements of traditional finance markets.
Cycle phases are often rapid; crypto increases in value, investors take profits, then there’s the inevitable crash before the cycle repeats. Optimism about a new project and a rush to buy coins push up the price, then selling brings the price back down. For example, if a currency is experiencing a bullish trend, everyone becomes excited and starts buying. But when there is a downturn, the same investors become fearful and start to pull back.
Crypto Market Cycle Phases
Understanding the different crypto cycle phases can help investors make smart decisions and recognize when it’s time to buy, hold, or sell.
1. Accumulation
The accumulation phase occurs when prices are low and stable, but there are small indications that growth is happening. The devastating crash is done, but there’s still very little interest and trading volumes are low. Once price increase occurs, its slow and cautious. The market can feel flat, but this phase is setting up for the next bullish trend.
Accumulation often occurs when the broader economy is stable. For example, if interest rates remain low, riskier assets like cryptocurrency are more attractive. Smart investors quietly start buying, while most remain skeptical. Those who accumulate early will opt to hold their assets in secure wallets, like the options listed among the 99Bitcoins top ERC20 wallets, to ensure accessibility and safety during the inevitable volatile periods.
2. Uptrend (Bullish)
The bullish phase is the one that gets investors excited. This is the uptrend, where prices increase fast. There are plenty of new projects, positive headlines, and technological innovations that drive growth.
Bitcoin is often leading the trend, increasing faster and earlier than most other coins. Bitcoins have seen exponential gains during uptrends in the past, notably rising from $10,000 to more than $60,000 in 2020-21.
Investors are no longer fearful, and more are entering the market. This results in higher prices and investor confidence.
3. Distribution
During the uncertain distribution phase, investors are seeing profits and more latecomers are getting involved. However, no market can keep trending upwards. There are fluctuations; some days seeing increases and other downtourns. The trend isn’t clear anymore.
Yet, the number of investors continues to increase, thinking that prices will continue to climb. Momentum is slowing, and a silent shift is happening as the price levels out.
4. Downtrend (Bearish)
Prices suddenly fall fast, and there’s a panic to sell. Investors start selling at a loss, and fear permeates the market. Headlines are negative, which feeds negative sentiment. There’s no investor trust.
However, smart investors will buy now, since the accumulation phase will start again in due course.
Identifying The Current Crypto Cycle Phase
Based on price trends, market sentiment, investor participation, technological trends, and macro conditions, the crypto market is currently in the uptrend phase. This can be seen by studying Bitcoin’s performance. Bitcoin is up 525% from its crash in November 2022, showing resilience despite economic upset on a global scale. This reflects “uptrend” behavior, where price appreciation is occurring alongside occasional corrections. Since Bitcoin leads the rest of the altcoins in cycles, it can be estimated that the crypto cycle phase is currently bullish.