Investing in the financial markets can quickly become an emotional rollercoaster, and Bitcoin is no exception.
When it comes to investing, human emotions typically fluctuate between two extremes - fear and greed.
Movement from one emotional extreme to the other creates the market cycle. For years, traders and investors have studied this phenomenon using a chart known as the “Wall Street Cheat Sheet.”
The highest of market emotions - euphoria is the point of maximum financial risk. At this point, the investor believes that everything is going according to his plan and the market trend will not change.
The cryptocurrency market was euphoric in the fourth quarter of 2017. The price of Bitcoin rose from $6,000 to $20,000 on speculation that the launch of futures would lead to a large influx of institutional investment into the cryptocurrency market.
Be that as it may, the bubble burst just two weeks into the New Year, when China and South Korea - two of the largest markets - banned cryptocurrencies. Along with the bubble, hopes for quick, easy gains burst.
Since then, the Bitcoin market has gone through “complacency,” “anxiety,” and “denial.” In this interpretation, it can be assumed that the stage of"denial"lasted five months, as sellers several times failed to push the BTC price below $6,000, which gave hope for the recovery of the BTC market and the altcoin market by the end of the year.
Those hopes were dashed when the price of BTC fell below $6,000 on November 14, triggering the start of the panic stage. Investors began to sell all assets.
Since then, the price of Bitcoin has fallen by almost 50%. It is currently trading at $3,457, according to CoinDesk. In addition, monthly trading volume increased by 30% in November. Such a massive sell-off indicates that many inexperienced investors have left the market, dumping coins at bargain prices.
The next stage will be the capitulation stage, and this will most likely occur after the price falls below $3,000. The result of capitulation will be a long period of sluggish price movement and hamsters crying at night.
After capitulation, the“ anger ” stage beginsduring which the investor desperately searches for the reason for his losses..
After this, awareness of reality comes, and anger is replaced by the stage of “depression”.
When the market has lost all value in the eyes of the public, it begins to gain momentum little by little. But at this point, investors' emotions are still fresh, so they will never believe that any form of bull run can lead to real profits. However, the point at which the market condition seems most hopeless is the point of maximum financial opportunity and minimum risk.
After disconsolate sellers leave the market, a stage of accumulation at underlying prices begins, which triggers the start of the next market cycle.
As the famous billionaire investor Warren Buffett said: “Be afraid when others are greedy! Be greedy when others are afraid!”
According to www.coindesk.com
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