Making investment Decisions at Various Phases of the Crypto Market

Content outline

1.What is Market cycle?

2. Phases of the market cycle

3. The peak phase and investment decisions

4. The trough phase and investment decision

5. The recovery phase and investment decision

6.Crypto Holding and Trading Differences

7. Relationship between BTC and Altcoins

What is Market Cycle?

Economic activities have always been marked with phases. For instance, there are times when the market will perform and there are other times the market will not perform. As such investors and traders tend to behave differently in these phases.

It can be likened to human activities that are bipolar in nature. We have rainy season and dry season, we have winter and summer, we have cold and hot, we have down and up, we have white and black, and we have happiness and sadness.

The up and down movement of the market resembles the formation of cycles. This is why it is called market cycles.

In the crypto market, this cycle happen often. The volatility nature of the market makes the cycles or the phases of the crypto market to be faster than other forms of markets.

Therefore, what are the phases of crypto market and what do they mean to investors and traders.

Phases of the Crypto Market

The image above shows the emotions of market participants at various phases or formation of the market.

  1. Peak Phase

This is the phase where assets prices in the financial market are very high. At this stage investors and traders are very happy regarding their investment decision. This phase of the market can be very tempting as investors and holders believe that the asset price will keep rising. It is said that everyone is a genius in a bull market, this is what it means.

Investment Decisions to Make at the Peak Phase

  • FOMO Decision:

Fear of missing out often happen at this stage. People normally see the money making opportunity in the market and as such don’t want to be left behind. Money invested at this stage of the market might be swept away by the next phase of the market.

  • Exit Decision:

What smart holders and investors would do at this phase is to exit part of their investment, take profit and hedge. In the crypto market, the peak phase is always the all time high of a coin or a crypto assets. So, every ATH in the crypto market is an indication of profit taking. This is what smart Cryptoprenurs should do.

  1. Trough Phase

This is the period in the market when the aseet prices are so low. This phase is due to the force of supply being greater than demand in the market, the price of financial assets tend to decline. The investors and traders that bought during the peak experience the following; Anxiety, Denial, Panic, anger, Disbelief and depression

Investment Decisions  at the phase

Capitulation Decision

This is the decision by investors and holders to sell off their asset holding at a very loss making price due to the market condition. The actions of these players exert more declining force on the market and thereby causing a further decline in price.

This is currently happening with BTC and Dogecoin.

Holding Decision

These are market players that still believe in their financial assets composition despite the market condition. They hold onto their investment and patiently wait for the phase to pass while the bull run start. These are smart market players that understand the different market phases.

Purchasing Decision

Due to the sale off of financial assets by market players, the value of crypto assets or stock becomes low. According to Baron Rothschid ‘the time to buy is when there is blood on the street’. The smart market players that sold when the peak was taking place would buy more coins at discounted rates. This is what the crypto market went through when Elon Musk tweeted that Tesla would cease from using BTC for transaction due to the environmental impact of mining. The same period China also threatened to ban BTC from the country. The price of BTC and other Altcoins dipped.

  1. Recovery Phase

This is the phase that shows a steady rise in the price of financial assets that dipped. At this period the demand for the assets are increasing, the news are positive and investors are buying up stocks and coins again.

The psychology of this market phase includes; belief, optimism and hope. The market participants are expecting that the price of coins would recover and profit will be made.

Investment Decision at this phase

Buying Decision

Market participants are already seeing opportunities in the financial market, as a result they start buying coins again. However, this is not the perfect time to buy coins but it s still good if the prices of coins are still low relative to the ATH.

Timing Decision

Those participants holding coins are now very alert about market performance so they can take profit. They are those that invested during the peak and also experienced the trough, they are now expecting profit. The important thing these players should do is to pay attention to market.

BTC and Altcoins are currently recovering.

How is Holding Crypto different from Trading Crypto.

Holding or investing is time in the market (month to two years)

Trading is timing the market (minutes to weeks)

While trading and holding are buying and selling of coins based on speculation but the time vary.

The time to complete crypto trading is very short.

The time to complete crypto holding is usually longer…it could be weeks, months or years

The aim of the two activities is to make profit.

Relationship between BTC and Altcoins

  1. Steady BTC growth, steady Altcoin growth

Decision: look for coins that are lagging behind and buy.

  • Parabolic BTC growth, Altcoins decline

Decision: Hedge your crypto assets because Altcoins will lose huge amount of value

  • Bitcoin stagnate, Altcoins grows

Decision: Buy low valued Altcoins



Author: Admin
Trenndify Co founder

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