The Crypto Withdraws: What Stage of the Market Cycle is Bitcoin?

For the best and the worse, it’s not euphoric.

It goes without saying that mentioning anything about crypto or Bitcoin could strike a nerve with most traders and investors. Run of the mill traders scramble to keep their profits or deal with the constant downtrend. Investors are not used to big swings like in traditional forex markets. Bitcoin, since it’s all time high of $19,500, has reached $6440 of this morning and shows signs to go lower. The only groups that are content with this drop, even giddy, are OG traders, people waiting to buy near the bottom, Bill Gates, Paul Krugman, and BitMex shorters.

Where’s the Bottom?

The big question on most minds is this: where is the bottom of the BTC and the crypto market? Most people don’t see it going down forever, being bullish in years to come, and this must turn around at some point if this is the case. So the answer? No one knows where the bottom is. The current bottom is $5937. If it beaks, the next supports are at $4300–4600. If that’s the case, you can forget about any altcoins during the time being.

Many think that $5937 is the bottom, and if so has great. Some believe $5k, $4k, and even $2k. The best answer is to not try and predict the movements of all the markets, but to prepare TA and risk management for every scenario with its opportunity costs and benefits. That will allow you to be the most prepared (and the most sane). I would like to prepare a separate article for using TA and risk management in any scenario for the situation that we’re currently in. My only suggestion right now is don’t worry about catching the bottom because you may miss it. Do your research to find the bottom 10% and make your decisions there.

Euphoria is long gone for now

So we don’t know the bottom, but what about that Wall Street cheat sheet we keep seeing? You know the one with all the stages of a market cycle. Can we at least get a location of where we are? Yes and no.

As a disclaimer for looking at the Wall Street chart, keep in mind it’s meant to be an abstract, not a precise conclusion. So if it’s accurate (and I think it tells market cycles well) it’s not going to tell you the bottom by the exact number. It’s designed to tell stages, not prices.

What Stage Are We In?

We know at a minimum that we are not in the following stages:

• Disbelief
• Hope
• Optimism
• Belief
• Thrill
• Euphoria
• Complacency

Those stages either describe a positive situation $BTC is in (which it isn’t) or a dip down situation (which it’s already surpassed). Let’s go over the rest of them briefly.

• Anxiety: this is a stage abstractly described as a point where the price action isn’t funny anymore. It’s more than a dip. But it’s also something not on the scale of portfolio annihilation.
• Denial: a stage where we have assumed it’s a bad situation, but second guessing ourselves about the downward process. It’s a battle between what we see on price action compared to what we see on what the market should be.
• Panic: the downtrend is real, but since many were in denial it becomes too real too fast, so they look for exits, not from a exit strategy but from a fear of what could happen.
• Capitulation: those that are left, realize it’s not the bottom and they need to pull all their money before they lose everything. This is a situation where they thought the bottom was in, but wasn’t, and now they think it’s a free fall.
• Anger: after realizing it wasn’t a free fall, but it still went down lower, they become completely enraged that this would happen so soon.
• Depression: a third low, where the people have gone too emotionless to care about price action anymore.

So what stage do you think we’re in? I have it narrowed down to three (like I said they’re abstract and not concrete) but most likely entering one.

Panic, capitulation, and anger describe crypto markets and crypto Twitter very well at the moment. I believe that everyone reacts differently to the price movements, so some will be panicked while others angry. But I sense that capitulation is where we’re at with some blending on the bottom of panic. People are getting liquidated to the point that they can’t do anything but stay in fiat or Tether. So I think this is the stage that plays well. We could make a case with anger, especially with many Crypto Twitter personalities fighting each other. That would pair with the recent climb in April as well, but we haven’t seen a local uptrend and lower low yet. The case can also be made for Depression, but I think the prices are too high and BTC dominance is too low yet for that. It would be a stage that describes prolonged portfolio destruction.

So I believe the best stage that describes our current trend is Capitulation.

The Good And Bad of the Downtrend

The bad of the downtrend is obvious — people are losing portfolio net value and our emotions get rekt along with it. But it’s important to remember the good part of the downtrend if you believe and stick to the plan that Bitcoin will go back up.

1. You can learn so much during this time. I’ve learned so much more in a bear market than I ever had in a bull market. It’s easy to make money and have no skills when all coins increase 100s of percent a month. Euphoria creates bad risk management. But there’s no survival or adaptation in that when things go down. That’s why your seeing large CT personalities exposed. It’s a new breed of market (6 months now) and the land creatures can’t survive the rains that produced heavy waters with no land in sight.
2. You learn that euphoria and profits are an addiction and you shouldn’t be controlled by them. These times really test emotions. It’s easy to see how bad things can be, but realize we should never let money, profits, and crypto control us. This is a time to reflect from not serving money.
3. This puts you in a position to make optional profits next run. The closer we are to the bottom, the more likely you are to make more money in the long haul, and possibly not have to trade as much. Because of all the panic and anger, there are less people here and you have a chance to position yourself to have higher profits that others.

If you have any questions or comments, feel free to DM or contact me on Twitter @hodltalk