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4 Phases of the Crypto Market Cycle – What Is It, How to Interpret It, and Where Do We Stand Right Now? 

Date
19/10/2022
Written by
Lykke
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October 19th, 2022. Trading cycles play a key role in the crypto market so you may be wondering, how long is a crypto market cycle? Well, most of the previous crypto bear markets lasted 289 to 306 days. However, negative cycles, such as the current Bitcoin cycle, are part of the broader market cycle that includes bull markets. By the way, bull markets typically last longer than bear seasons. 

So, having in mind that this bear market has been on for almost a year, does that mean that we are about to break through? Does history really repeat itself or, better said, do crypto cycles repeat themselves? 

What Is the Crypto Market Cycle & How to Interpret It?

Simply put, a crypto market cycle is a natural phenomenon during which prices of crypto assets move either upwards or downwards within a certain period. Trading cycles are typical for the stock market as well as other financial markets, and, thus, crypto is not an exception. These price movements are cyclical, which means that they occur again and again. 

Each crypto cycle consists of accumulation, markup, distribution, and markdown stages or phases that refer to the following price movements – rise, peak, fall, and, finally, bottoming out. 

Accumulation Phase 

The accumulation phase always follows a major price crash. Once the price starts flattening and the overall sentiment varies between boredom and disappointment, that usually means that the worst has likely passed. That’s also when seasoned traders, value investors, and corporate insiders start buying as many coins as possible (thus the name – accumulation).

Markup Phase 

Market sentiment has switched from ignorance or neutrality to slightly positive, and it is gaining momentum slowly but steadily. Prices are relatively stable, there are a lot of newcomers buying in, experienced traders are buying every time the price dips a bit, and FOMO starts kicking in big time. The volume is getting higher, prices are going up, and, at this point, everyone is ecstatic and anticipating even higher points.

Distribution Phase

Once the prices start losing momentum and the harder it gets to break all-time highs, the more buyers turn into sellers and the sentiment switches again, from euphoric to fearful (especially from the perspective of those who bought at the very top). The more people start to sell, the more prices drop, and investors start questioning the continuation of the bull market. 

Sometimes, economic or political news hastens the end of the distribution phase. For instance, the war in Ukraine, and the rise of inflation rates were some of the factors that triggered this bear season. 

However, bear in mind that many people have also started losing trust in traditional, fiat, currencies and questioning traditional monetary systems. Somewhere around 5% of the global population had invested in crypto during the past couple of months, seeing digital currencies as one of the best ways to diversify their portfolio. Aside from cryptocurrencies, they also invested in precious metals, such as gold, while the popularity of real estate and bond investing has drastically fallen. 

Markdown Phase 

New and inexperienced investors are in pain since most of their investments went down badly. Some of them have sold at a major loss while some of them have decided to accumulate more tokens now that they are on sale because of their long-term conviction and faith in crypto. A very small number of investors who sold at the right time and took profits are now buying again. New investors are coming in, cautiously buying at every dip, and patiently waiting for better days, which announces the beginning of the next accumulation phase. 

Where Do We Stand Now In the Crypto Cycle?

The crypto market started crashing at the very beginning of 2022. After touching the $18,000 lows in June this year, we experienced a partial recovery and Bitcoin went through a relief rally, touching the $25,000 range at the beginning of August. 

The fourth quarter of 2022 still looks quite uncertain but, knowing that we are currently testing the trendline and the selling pressure is getting exhausted, potentially, we will be bottoming out in the coming weeks or maybe months. From our point of view, we are somewhere between the distribution and markdown phase and, if nothing really bad happens and we manage to stay above the market manipulation schemes, it is highly probable that we will be back on track by the end of the year.

Summary 

Now that you understand the crypto market cycle and its phases, you can understand that each of these phases actually offers some benefits. You should accumulate tokens when the market is in the red and sell at a profit once everyone gets overly optimistic about price movements. 

So, since you still have a chance to buy crypto at low prices, you might want to check out Lykke – a 0% crypto exchange that makes it easy to maximize your gains and makes buying and selling crypto a smooth and pleasurable experience. Sign up here or read more about Lykke Wallet Crypto Exchange in the article from Best Reviews!

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