How To Play The Bitcoin Market Cycles

What You NEED TO KNOW Before Investing Into Crypto

If someone were to ask me what the very first thing they should learn when they are starting their investment or trading journey, there would be a few options I would consider.

I could begin with the different types of markets they could invest into.

Or I could talk about the differences between investing and trading.

While there’s plenty of things I could tell someone, I think that informing them about market cycles is probably the thing that I would start with.

Knowing about market cycles can save you (and make you) potentially millions of dollars.

That’s why in this post, we’re going to go over market cycles, along with a few other things so that you get a good overview.

*Disclaimer: This content is not financial, legal, personal, or professional advice. Louis and Cryptolete are not professionals. Past performance does not guarantee future results. Never invest more than you are willing to lose.

There are two parts to this presentation

Part 1: What is crypto, why you should get involved with crypto, and how to get started with it. Part 2: How to trade the 5 crypto market cycles, including the best time to invest and when to stay away, along with how to trade to protect your capital.

Part 1: Introduction To Bitcoin, Trading, And Investing

What Is Bitcoin?

• Bitcoin is the first successful completely decentralized digital currency.
• Bitcoin is decentralized, so it’s not owned by any company, corporation, government, or organization. Because it’s not owned by anyone, that means it is peer-to-peer.
• It’s digital, which means it is on the internet and not a physical product.
• And it’s a currency, which means that people use it as a means to pay for things, to hold value, and to trade.
• Bitcoin is equivalent to digital cash or gold. In many ways, it’s better because it can be sent anywhere in the world very quickly, cheaply, and secure.
• Bitcoin is peer-to-peer.

So, Why Should You Get Into Crypto?

At this point, it is pretty obvious…

You can make life-changing amounts of money by trading crypto. Crypto has grown thousands of percents in the last few years. $100 worth of Bitcoin 7 years ago would have been worth about 75 Million dollars at the peak of 2017, and it is believed that bitcoin will surpass its peak in time. Whether that takes 3 years, 5 years or even 20 years is the question.

You can start trading crypto with even small amounts of money.

Ultimately, crypto will be the future. It will soon be integrated into everyday life. Getting involved with it now is a great opportunity.

How Do You Get Started?

Getting started with crypto is simple.

A few steps to getting started include

1. Signing up to an exchange such as Coinbase
2. Buying crypto
3. Choosing your investment and trading style
4. Take trades and manage your risks

Regardless of what you do, you should learn about market cycles, fundamental analysis, technical analysis and other things that will help you become the best investor and trader you can be and understand when the best time to buy is.

To save you some time, I’m going to link out to two articles on how to get started with crypto here (article 1) and here (article 2).

Different ways you can trade and invest in crypto include:

The best investing method for the long term by dollar cost averaging in each week - This method of simply automatically buying a set amount of crypto each week regardless of the price has been proven to be a winning strategy. It is recommended that you have an account that you simply dollar cost average into each week for the long term. You can also choose to invest by putting in a large sum all at once or to split your purchases up into a few payments. Splitting your payments up and dollar cost averaging your way in reduces your risk tremendously. With saying that, if you understand market cycles, then putting in more money at the bottom will yield greater returns.

Part 2 — Understanding Markets

• 1873 — Stock market crash of Vienna Stock Exchange
• October 29, 1929 — “Black Tuesday” stock market crash of the New York Stock Exchange
• October 19, 1987 — “Black Monday” — Stock markets around the world suffered huge losses
• March 10, 2000 — The “dot com bubble” led to internet companies going out of business and a total loss of over 5 trillion dollars (more than 5 times the entire market cap of all cryptocurrencies at their 2017 peak).
• 2008 — The Global Financial Crisis and housing bubble
• 2018 — The Great Crypto Crash

All of these crashes saw monumental decreases of value across their respective assets. And yet, in the long run, the stock markets are still booming, the internet has taken over the world, and bitcoin has continued to survive.

What this teaches you is that crashes are the best buying opportunities.

When everyone else is scared and selling, that is precisely the time when you should be buying. When all hope is lost, that is the time to be putting up the most amount of available capital into fundamentally sound assets.

As Baron Rothschild once famously said, “buy when there’s blood in the streets, even if the blood is your own.”

Just looking at Bitcoin by itself, you can see that there have been at least 3 occasions where the price has fallen over 80%. And yet, after each crash, Bitcoin has continued to rise from the ashes to experience new all-time highs.

Check out this infographic from Twitter to see 4 of the different times bitcoin crashed over 80%.

Here is a graph showing a parabolic move up in late 2013 followed by a major correction in early 2014. It went from under $200 to $1200 before crashing all the way back down to around $250.

This happened in 2013.

If you compare this to the 2017–2018 graph, it looks very similar.

These type of “bubbles” have happened multiple times. Each and every time it seemed catastrophic. And yet, if you zoom out, you can see that each time bitcoin has crashed, it has always come back stronger.

The first graph of that huge move up followed by a massive drop of 87% is the first black circle in this chart. As you can see, over time, these “huge” moves become smaller and smaller blips on the radar. Eventually the surge and crash of 2017/2018 will be hardly noticeable, just like all the others.

This is why knowing the big picture is important because it will help you to know when to buy and sell for large investment purposes. Remember, the natural movement of any real market is up.

Now that you understand these market cycles, you are well prepared to do what you need to do the next time there’s a “bubble.” That is, you know that when the price is low and the media is talking about how bitcoin is dead and the market is boring and “dead,” that is precisely the best time to invest for the long term. You should also know that when you start hearing people who have no business talking about it, such as average everyday people, talking about it, that it will be time to get out. When it is pandemonium and everyone is elated and has “irrational exuberance,” or are just showing signs of incredible greed… that is when you need to start taking profits.

Remember this quote — “Be greedy when people are fearful and fearful when people are greedy.”

This is a simple, yet profound rule to follow, and it goes great with the other quote by Baron Rothschild about buying when there’s blood on the streets.

Some other rules you should know include:

1. Buy low and sell high
2. Never buy at the all-time high
3. Accumulate your investments when the price is low when the sentiment is down when the news says it's tanked. Those are the times for greatest growth if you hold onto your investments.
4. Understand market cycles and trends. Markets go up and markets go down. They never stay in one direction forever.

The Bitcoin Hype Cycle

Taking one further look into the hype cycle of bitcoin, you can see that there are 4 phases.

• PHASE 1 — ACCUMULATION
• PHASE 2 — INCREASE IN PUBLIC INTEREST
• PHASE 3 — PEAK
• PHASE 4 — CRASH

This happened it bitcoin and it happens in every market.

Always know where you are in terms of markets cycles and use that to guide your investment decisions.

The average % of the drawdown for phase 4 for Bitcoin is 86%. If we experience another market cycle similar to what happened in 2017, 1013 and 2011, going “all in when the price drops 80% seems like a very intelligent move.

Using the Bitcoin hype cycle graph, the way to play it would be to wait until everyone is fearful and the market sells off hard. Then wait till it stabilizes by creating a higher low. Then start to build up your investments. Investing at the 80% retrace is also an easy strategy, as well as dollar cost averaging your way in. Remember Warren’s quote — Be greedy when people are fearful and be fearful when people are greedy. If you do this, then you will successfully accumulate more bitcoin as the price continues to fall and you will have a lot more to be able to sell when the cycle gets into phase 3 again.

If you want to make even more money using the bitcoin hype cycle, you can actually “short” the market and profit on the way down. That’s a more advanced topic so we won’t cover it here, but it is something to look into when we are in a bear, or down trending market.

Conclusion

That about wraps it up for today’s lesson. In summary, use logic when investing and trading. Don’t invest more than you’re willing to lose. And only invest in a real project with real, underlying value. Invest in fundamentally sound projects with great teams that solve real-world problems. These are the only coins that will continue to go through this market cycle again and again. Other coins will simply fall into oblivion.

With saying that, if you do want to learn how to invest and trade, and you want to dive deep into cryptocurrencies and try to make profits by trading, then sign up to the crypto mastery course to learn how to trade these market cycles and discover strategies on how to profit and protect your wealth.

Originally published at http://blog.cryptolete.com.

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