The cryptocurrency market is famous for its volatility. Tokens like $BTC , $ETH , $XRP , Solana, BNB, Ethena (ENA), and many others often experience intense price fluctuations in short periods. It is exactly this volatility that attracts the attention of investors, as this price alternation brings greater opportunities for substantial gains, enough to change the financial level of those who choose to invest in knowledge before buying that 'hyped coin.' But behind these market movements, there is a deep psychological pattern known as the market psychology cycle. Understanding this cycle helps investors avoid emotional traps and make more rational decisions.
What is the market psychology cycle?
The market psychology cycle describes the predominant emotions that influence investors throughout a complete phase of highs and lows. This cycle is the same across different markets: stocks, real estate, commodities, etc. But in cryptocurrencies, it is faster and more intense due to the speculative nature and high risk of the sector.
The most notable moments in the cycle are:
Bull Market Phase
Optimism: The market starts to rise. Investors become excited, believing that 'the worst is over.'
Enthusiasm: More people enter the market. Projects gain prominence, social networks become euphoric, astronomical price predictions emerge.
Euphoria: Price reaches irrational levels. Everyone talks about getting rich quickly. This is where the risk of a bubble grows; Typical phrases: 'This time is different!', 'Now it’s going to the moon!'
Warning sign: Extreme trading volume, big promises, and massive entries of novice investors.
Bear Market Phase
Anxiety: Price stops rising, the first doubts arise: 'Should I sell or hold?'
Denial: Many think, 'It's just a temporary correction, it will rise again soon.'
Fear: The market drops further, negative news arises. Fear dominates.
Despair and Capitulation: Prices plummet. Many sell at the bottom out of panic: 'I've lost everything.'
Depression: Confidence disappears. Interest in cryptocurrencies decreases significantly.
Hope and Optimism: Slowly, solid projects begin to show signs of recovery. Experienced investors reappear, buying at low prices.
And how to survive the changes in the cycle?
· Have a plan.
Set clear objectives before investing: when to buy, when to sell, and how much you are willing to lose.
· Emotional control.
Don't enter the market just because everyone is winning, nor flee because everyone is selling.
· Study the fundamentals.
Understand the real value of the assets you invest in, to withstand price fluctuations.
· Diversify.
Don't put everything into a single project. Crypto is a very high-risk market. But choose a few well-founded projects, and if you have to 'bet' on a smaller project, do it with a small percentage of your capital.
The market psychology cycle explains why cryptocurrency prices often do not reflect their real value in the short term. By understanding these phases and maintaining a rational posture, investors increase their chances of surviving and thriving in crypto markets.
Remember: surviving the storm is usually more important than trying to predict when the sun will shine.