Thread by @OxyaOrigin

Anatomy of the #Crypto Cycle 🔄

Every financial bubble in History, be it the 1920s Dow Jones, the 1970s or 2000s Gold bull run, or the 1720s South Sea Bubble, featured the same archetypal structure.

Let me break it down for you, using this crypto cycle as an example 👇

1/ J. Law's system in 18th century France, or the 1920s US stock Market Bull Run, are arguably very different from the 2020s crypto market.

Yet, when you zoom out, a similar pattern emerges, not just in price, but also in the behavior of market participants & institutions.

2/ The 1st common feature to every bubble is easy credit.

In 18th century France, J. Law introduced a fiat money system, while the 1920s Fed eased credit after WWI.

This time, stimulus checks, QE infinity and +10years of near 0 interest rate acted as perfect catalyzers.

3/ In "Mania, Panics & Crashes", Charles Kindleberger takes us through financial history & outlines the similarities found in every bubble.

He defines 4 phases: the Stealth Phase, the Awareness Phase, the Mania Phase, the Blow Off Phase.

4/ In the Stealth Phase, nothing significant happens. People with insider knowledge expecting a rush start accumulating at low prices.

It is exactly the behavior of maximalists that take profit from depreciated prices to accumulate coins before the next #Bitcoin halving.

5/ Then come the Awareness Phase. Prices start rising and attract institutional investors. At this point, there is little attention from the media or the public.

During this cycle, this corresponded to #MicroStrategy aping into Bitcoin & VC funds deploying capital.

6/ After a bear trap liquidating overleverage bulls and spooking off weak hands, prices start accelerating and the asset gain public awareness. At this point retail start buying and media coverage increases.

This is the beginning of the "Mania Phase".

7/ In this cycle, it happened after Bitcoin broke the ATH of the previous cycle (Autumn 2020). At the time, Grayscale (GBTC) witnessed humongous demand that translated into massive spot buying and hence led to price rising parabolically.

8/ Enthusiasm is then replaced by Greed. At this point, everyone is trying to ride the wave to make a quick buck. Every 2 day, you get a call from a friend you haven't spoken to in years.

It is typical herd behavior and FOMO (Elon is buying so I am buying).

9/ Then comes the delusion. "The Bull Run will last forever", people with laser eyes invading ur twitter feed, your ex that failed 4th grade math & never traded a stock becomes a tiktok crypto influencer.

There is still capital coming in, but less than before. The 🐻 is near.

10/ After a top is reached, a rally trapping the remaining bulls & people that missed out ensues.

This one has taken many of us aback since it broke the previous ATH.

Yet, the RSI clearly indicated that the downtrend was real.

11/ Then people exit in fear. Despite some fakeouts price inexorably trends lower until overleveraged traders & undercollateralized funds (LUNA, 3AC, Celsius) are liquidated. Forced sellers take the price down to the abyss.

12/ We are now in the last period of the "Blow Off Phase": Despair. Headlines such as "Crypto is Dead". Most (rekt) newcomers capitulate and turn to other things.

It can last months until smart money accumulates enough coins to stabilize the price & we get to the stealth phase.

13/ Don't despair friends.
Maybe the bottom is in, maybe not.

But we are definitely near the lows & nothing has changed: crypto still solves the most important problem of all --> money.

This is a time for accumulation.

Cut your spending, DYOR and stack as hard as you can ...

14/ ... because one thing is for sure, builder will go on building, #Bitcoin will continue to do its thing, politicians will continue to print & another halving is coming in 2024.

Zoom out, turn out the noise and stack as hard as you can ✌️