Thread by @DreadBong0

🧵

Let's talk about market cycles & why its important to understand them

How it can affect your decision making & maybe help control those emotions in this super volatile space

✅ Phases
✅ Sentiment
✅ FUD
✅ Bull Cycle
✅ Bear Cycle

So.. lets discuss

$BTC $ETH #crypto

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Things are rosy right now..

Charts look great, every project is making gains and there is a lot of money to be made

But to those who play close attention, this is just how cycles work..

It pays to understand where you are and what comes next so you can plan..

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Nothing goes up forever..

"Up Only" is just a meme.. and yes, this incredibly bullish cycle will indeed, come to an end at some point..

But why is this?

And more importantly, can this time be different?

Well, we need to break those down

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When you look at the #crypto market cycle, there are high peaks and deep, low chasms

When the market peaks, there is an abundance of enthusiasm & attention from retail & media..

But we need to turn our attention to those chasms for maximum opportunity & our starting point

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In fact, lets work our way through the whole cycle..

We begin at the bottom.. there's minimum enthusiasm and participants are only those who were either trapped from the last cycle or opportunist investors

The latter is "Smart Money" & these guys know how the game is played

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Buying when nobody is looking is one of the best investing strategies known to man.. one that has served me incredibly well

But there are drawbacks.. you have to be resilient and you have to know what you are holding through research..

Then you wait.. A loooong time

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But those who accumulate in these deep valleys are patient because they know the game

They add on dips and their giant balls of wisdom allow them to simply ride the waves of emotion & FUD..

They patiently wait for the market to leave the accumulation phase

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Here we enter the first break out/awareness phase..

Panic sellers & bandwagon media realize the space isn't dead and begin to peak interest once again..

Maybe some re-buy their positions.. but there is still a good level of skepticism after the last crash..

8/

The beginnings of a trend emerges..

Higher highs & higher lows ensures optimism and for the first time in a long time.. there is hope!

You have to remember, there was over a year of downward momentum with no end in sight..

Finally, something to cling too..

But then..

9/

A sell off..

People revert back to the emotions that shaped them the past year and see red.. "Its happening again!"

Continuation of the bear market?

No..

This is the first shake out and a chance for smart money to accumulate more

This results in a bear trap 🐻

10/

Structurally, something important happens..

Usually we see a level that was once serious resistance, flipped and turned into significant support..

This instills confidence and once again, positive momentum resumes and now increases

A strong trend is emerging..

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This results in a lot of media attention..

You see CNBC & Bloomberg start including crypto experts like @APompliano or @scottmelker..

It doesn't stop them from scoffing at their ridiculous positivity but they understand the #crypto space deserves more airtime..

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A strong belief is now building in the space..

New trends are emerging and we are getting our first glimpse at new technologies..

Whether it be #DeFi, #NFTs or something else, early examples are beginning to surface & they fundamentally (but quietly) are changing the game

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Now it is not all plain sailing from this point forward..

We have many rounds of FUD to contend with and it can range from ridiculous claims of..

"Crypto is destroying the world!" to "A #Bitcoin ate my baby!"

This will happen on & off for the entire cycle

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Which also brings up another issue..

You will encounter powerful individuals sharing their views on $BTC

Whether its Jamie Dimon, Warren Buffett or @elonmusk.. sometimes good, sometimes bad..

"Rat poison squared".. "Bad energy" etc

But words are simply words..

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Look at what these guys are doing.. not what they are saying..

Elon Musk criticized #Bitcoin's energy usage.. yet he & @Tesla bought an incredible amount of #BTC

Dimon said he would fire any one of his employees who held $BTC.. Then purchased #crypto companies

👀✅
💬❎

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FUD shakes out weak investors & allows smart money once more to increase their positions..

Shorter time-frames shows doom & gloom on these dips..

It's when you zoom out that you see the full picture..

A strong, powerful trend 🔥

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These trends push prices higher..

In fact, it's time to re-test previous All-Time Highs

Now the media is paying more attention.. "Surely not"

It's at this point that everything changes.. people are now convinced its finally time..

We are in a Bull Market 🐂

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We break ATH & now the media switches

We see regular crypto segments & hedgies queuing up to tell us $BTC & #crypto is the future

This, once again.. peaks the excitement of retail

Remember those guys? The ones who bought the top of the last cycle..

Yep, they're back

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Retail always arrive last to the party

It's just the way the world works..

Grass is green, dogs bark, water is wet & retail turns up late

This phase is where you will start to hear $BTC & $DOGE in the wild..

Maybe your barber or uncle mentioning this "hot new thing"

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This is by design..

Remember smart money who accumulated years back?

Well, they need people to offload those coins too.. and its going to be worth A LOT of money

So who else but those unsuspected newbies who believe they are jumping in on the deal of a lifetime

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Now is not the time to sell but this phase is important as it opens the door to a flood of new investors

With the market making ATHs & a whole bunch of new capital floating around..

A trickle down effect causes a lot of crazy price action on lower caps..

Eg.. Alt Seazon

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So now we have a perfect recipe..

✅ Media is paying close attention
✅ New retail investors are here
✅ More capital is floating around
✅ All projects are printing green after green

The Thrill Phase.. where the market can do no wrong & everyone is winning

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Word begins to spread far & wide on the insane gains being made..

Media reporting on $DOGGO moving 5,000% in 10 days..

Families in shock at the stories of earning insane returns on internet money..

Now your nan wants to buy in..

"Lets re-mortgage the house for #crypto!"

24/

People begin increasing their leverage and speculators start looking for riskier investments at the hope of replicating crazy gains..

"Buying $MOO because its Animal season after $WOOF mooned!"

We've well and truly left the Thrill Station and arrived at platform Greed

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Until now, there's been an orderly flow of mark ups & draw downs

Upward momentum meant any dips were pounced upon due to market enthusiasm

But the greed stage is where things change.. and fresh, new participants skipped the part where you are supposed to understand trading

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Now is the time for mad FOMO

New entrants feel they can do no wrong & those who are yet to enter, feel like they're missing the party

This creates an environment of more risk & irresponsibility

The media are now screaming #crypto from the rooftops & everyone is listening

27/

Greed turns to Delusion

The idea that this will last forever & the revolution will be televised

New money is truly on cloud nine & already making plans for all that money they are about to make in the near future..

But Smart money have other plans..

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You see.. Smart Money was here when no one was listening

There was no-one screaming from the rafters or media berating them to jump in on #crypto..

Smart Money had time to quietly assess... Now, they see the insanity that is in front of their eyes..

The Mania Phase

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Whilst New Money is buying projects that are 10,000% up..

Smart Money is making plans to cash on gains made from those entries years back

Not only are they up.. they are up BIG! And it just so happens, they own quite a lot of the supply

Enough to do some damage

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With Euphoria all around us and Greed at an all-time high.. Smart Money wants out

Mania Phase has pushed prices to unprecedented levels & valuations now make little sense.. but new money doesn't understand this..

Smart Money does

So, the selling begins..

31/

"That's a bigger red candle than normal"

But denial & complacency doesn't allow people to see this as anything but a minor setback until fresh all time highs

There it is! The big ol' bounce we've been waiting for..

But New Money doesn't see the trap they've just fallen in

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The Bull Trap

Now, its too late as the distribution phase has begun from Smart Money on their insane gains from years back

The bounce was no more than a last squeeze to empty their positions & leave New Money to hold the heavy bags of Smart Money & their bloated valuations

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Smart Money is out.. and the brutal reality of a Bear Market hits new entrants

Red candle after red candle pushes prices deeper & deeper and begins a cascading effect on charts that have only ever seen green for the past few years

It's all to raw & newbies can't understand

34/

Denial turns to Anxiety..

Anxiety turns to Fear..

Fear turns to Panic..

It's here we see a full breakdown of the markets as New Money begin dumping their positions in a panic after watching their new wealth disappear

This begins a long brutal cascading, effect

35/

All the panic breeds two types of investors..

One's who realize they aren't cut out for this space.. and those who learn from their mistakes

But its a brutal lesson for those who remain as all enthusiasm has been wiped out

Media now only talks about the continuous dumping

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A few months back the media was showing people how to buy.. now they are gleefully laughing at #crypto's apparent demise

But.. the worst is yet to come

With sentiment at an all-time low and nearly everybody in huge losses.. it's time for one last flush

Capitulation

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Some couldn't handle it anymore.. Others simply moved on

But the capitulation is a brutal reminder of the harsh realities of investing in such a volatile space

One last big red candle to end the show and inflict maximum pain

Crypto is now dead right?

Wrong

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Ever heard the term "Forged in Flames"?

The best investors imo, are those who are willing to take those harsh lessons and decide to learn & grow

What was once New Money, are now investors who understands more about the game

HODL is not a meme here, as they're not selling

39/

But.. its not just them

Remember Smart Money who decided to sell up on their enormous gains & spend them on lavish vacations, drugs & lambos?

Well, they're back.. and a 80% decline looks rather attractive to them

It's time to re-enter.. The Accumulation Phase

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They don't call them Smart Money for nothing.. and they're ready to do it all over again

By proxy, those New Money that stuck around & decided to also accumulate.. just became Smart Money too

It pays to be early in this game.. Early and patient

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Is this definitely going to happen this time around?

Maybe.. Maybe not..

But keep an eye out for the signs & it may just help you decide whether to hold on or take some cake off the table

People forget markets are driven by emotions.. It's in our nature

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So there you have it..

My views on Market Cycles and the psychology behind them

If you enjoyed reading, I'm happy for you and hopefully it provided some form of value

👍👍

$BTC $ETH

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