Decoding the three market cycles is your way to understanding macroeconomics
Many believe that market movements are random, but the truth is they follow cycles that can be predicted with astonishing accuracy. The key lies in understanding three main indicators that serve as an early warning system and a roadmap for the savvy investor.
1️⃣ Leading Economic Indicator (LEI): Prophecy of Crises
This indicator is the crystal ball of the economy. It does not wait for the disaster to tell you about it, but predicts structural damage in the economy months before the general public realizes it. This indicator relies on a set of leading data such as the bond yield curve, new housing starts, and consumer confidence. When this indicator triggers a negative signal, it means that the countdown to recession has already begun.
2️⃣ Concurrent Economic Indicator (COI): Mirror of reality
If the leading indicator is the prophecy, then the concurrent indicator is the moment of truth. It measures the current health of the economy through real-time data such as employment, industrial production, and retail sales. Historically, this indicator has never been wrong; when it starts to roll over, that is the official announcement of the beginning of a recession. It is the indicator that confirms the prophecy has come true.
3️⃣ Lagging Economic Indicator (LAG): Inflation Compass
This lagging indicator comes in to confirm the direction the economy has already taken. Its main function is to determine the inflation system and bond yields (upward or downward). Understanding this indicator helps us determine the overall investment environment, as declining inflation and yields are usually positive for risky assets like stocks and cryptocurrencies in the short term, even in the face of an impending recession.
Where are we now in June 2025?
We are in a very critical moment. The picture speaks for itself:
"We are in the late stage of the economic cycle"
✅ Leading Indicator: Triggered a warning signal (November 2024)
Concurrent Indicator: Holding up so far but the collapse is coming
Lagging Indicator: Clear downward trend
Current economic data supports this analysis. Major financial institutions like "JP Morgan" and "Goldman Sachs" have raised the probability of a recession to 40%, citing political uncertainty and trade tensions as key factors. Although the annual inflation rate in May 2025 stabilized at 2.4%, a reasonable level, the full effects of tariff policies have yet to manifest, creating a deceptive calm before the storm.
The Last Golden Opportunity: The "Blow-Off Top" Strategy
Before every major collapse, a final wave of rising often occurs, which serves as a trap for unprepared traders and a golden opportunity for professionals. This phenomenon is known as a "Blow-Off Top."
Why is this happening now?
With the lagging indicator (inflation and yields) trending downward, investors look for any assets that can provide quick returns. This directs massive liquidity towards riskier and more volatile assets like cryptocurrencies and tech stocks, leading to sharp and unsustainable price spikes extending until Fall 2025.
Cryptocurrency strategy for this phase:
Capitalizing on momentum: Traders should focus on short-term trading strategies like day trading and swing trading to take advantage of the expected sharp fluctuations.
Technical Monitoring: Key resistance levels must be watched. For example, Bitcoin breaking the $112,000 level could drive it towards a final peak at $120,000 before reversing.
Strict Risk Management: This phase is highly risky. Using stop-loss orders is not an option but a necessity to protect capital from sudden collapses.
Comprehensive Action Plan: How to build wealth in the upcoming crisis?
Real wealth is not built in times of prosperity, but in times of crisis. The upcoming recession is not just a threat, but a historic opportunity for those who have the knowledge and the right action plan.
1. Pre-Recession Phase (Now - Fall 2025):
Action: Cautiously capitalize on the recent uptrend.
Goal: Achieve quick profits and accumulate liquidity (cash or stablecoins).
Leading Indicator: Monitor the concurrent indicator (COI). Its moment of decline is a signal to exit the market.
2. Recession Phase (Post Fall 2025):
Action: Start gradual buying at significant dips.
Goal: Build long-term investment positions in high-quality assets at discounted prices.
Strategy: Apply a Dollar Cost Averaging (DCA) strategy on leading cryptocurrencies like Bitcoin and Ethereum, where you buy a fixed amount at regular intervals to reduce the impact of volatility.
3. Economic Cycle Bottom Phase:
Action: Buy more aggressively.
Goal: Maximize returns at the beginning of the new economic cycle.
Leading Indicator: When all three indicators (leading, concurrent, and lagging) start to reverse upwards, this is the sure sign that a bottom has formed and a new upcycle has begun.
Always remember, in the world of markets, knowledge is power, and timing is everything. Be prepared, as great opportunities wait for no one.
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