Those who follow the financial markets, especially the cryptocurrency market, notice that prices do not move randomly. There is a recurring rhythm known as the market cycle, a journey that begins at the depths of despair and ends at the peak of euphoria, before returning once again to the starting point. This cycle is influenced by macroeconomic factors and monetary policies, but it is fundamentally a reflection of investor psychology and their fluctuations between fear and greed.
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From bottom to top: how does the cycle form?
Accumulation phase: where silence prevails
In the aftermath of every crash, most investors leave the arena burdened with losses, and media interest fades. This dark period, characterized by fear and indifference, is a moment of silent accumulation by institutions and 'strong hands'.
In 2019, while newspapers described Bitcoin as a 'bubble that has burst,' the price was fluctuating between $3,000 and $4,000, levels that later proved to be a solid foundation for a new surge.
Rising phase: confidence gradually returns
With the first signs of recovery, followers begin to return. The price gradually rises, and with each new jump, the number of participants increases. Here, 'fear of missing out' (FOMO) is born, and the market becomes a fertile ground for innovation and global interest.
Bitcoin's rise from $4,000 in March 2020 to $69,000 in November 2021 was driven by a massive influx of liquidity following quantitative easing policies during the COVID-19 pandemic.
Distribution phase: when greed prevails
At this stage, optimism reaches its peak. The media talks about a bright future without limits, and individual investors are entering in droves, believing that the rise will continue forever. Meanwhile, institutions and major players begin to quietly liquidate their positions.
The end of 2017 is a glaring example: Bitcoin stabilized at $20,000 amidst media hype, but that was the moment of major distribution before a painful crash.
Decline phase: the return of fear and despair
After the markets run out of buyers, the decline begins. This phase is harsh, as profits evaporate, and negative headlines spread like: 'Bitcoin is over,' 'Crypto is just an illusion.' Individuals lose confidence and sell at a loss, while institutions return to monitor the market in preparation for a new cycle.
In 2022, with the U.S. Federal Reserve raising interest rates to combat inflation, Bitcoin crashed from $69,000 to below $16,000, marking the end of a historic bull cycle and the beginning of a new one.
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The lesson learned from the repetition of cycles
When comparing 2013, 2017, and 2021, we notice that the details differ but the essence remains the same:
Excessive fear = beginning of accumulation.
Rising confidence = ascent.
Excessive euphoria = distribution.
Deep despair = decline.
This repetition confirms that the market is a mirror of human emotions more than just numbers and charts.
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Summary
The market cycle is not just an academic theory, but a practical tool that helps investors see the big picture. Those who learn to read these phases understand that the best opportunities arise when everyone is afraid, and that the greatest risks emerge when greed prevails. Between these two poles, the market continues to repeat its eternal melody: from the bottom of fear to the peak of euphoria, then back again.
