The ongoing bear cycle in the digital asset market is nearing its end, with a strong revival and potential for cryptocurrency growth expected by early 2025, according to recent forecasts by prominent market analysts.
Well-known cryptocurrency analyst Alan Santana recently posted on the TradingView platform that the end of the bearish trend appears to be almost complete, with a massive bullish comeback expected. On the other hand, renowned cryptocurrency market analyst Michael van de Pope expects a stronger underlying bullish trend to emerge in early 2025 due to whale accumulation and a gradual recovery after the end of the 2024 bearish trend.
However, most cryptocurrency investors don’t know what a market cycle is. It is important to understand the cryptocurrency market cycle and how it may affect an investor’s investment portfolio.
4 stages of the market cycle
In the digital asset environment, a market cycle refers to a cyclical pattern of ups and downs in the price of a crypto asset triggered by a variety of factors, including technological developments, regulatory updates, market adoption, and market sentiment. Understanding these cycles is essential for investors looking to navigate the cryptocurrency markets efficiently.
A typical cryptocurrency market cycle consists of four main stages:
· Accumulation: The accumulation phase occurs after the market falls and values reach their lowest level. This period is generally relatively stable, while investor sentiment and public interest are generally low. During the accumulation period, informed investors begin purchasing cryptocurrency assets in anticipation of future price surges.
· Uptrend (bull market): After a period of accumulation, a bull market (uptrend phase) begins. During an uptrend, prices naturally begin to surge due to increased user demand, favorable market sentiment, and broader market adoption. The upward trend may be slow at first, but it becomes stronger as more users adopt buying mode, driven by rising prices and the fear of missing out.
· Distribution: A rising phase is followed by a distribution period. Prices rise to record highs and early investors begin to recoup profits by selling their holdings. Distribution phases are typically identified with an increase in market activity, but there are significant changes in market sentiment as smart investors begin to speculate about a potential downturn.
· Bear market (downtrend phase): This period is typically characterized by selling impulses exceeding buying pressure, resulting in a bear market (downtrend phase). As market optimism turns to pessimism, prices begin to fall. This period can be aggravated by negative events (bad news), contributing to further liquidation. When prices finally fall further, the cycle is complete and the accumulation period begins again.
How long does a cryptocurrency market cycle last?
Even though the history of the cryptocurrency market is still young, the industry has experienced several market cycles.
It takes an average of about 4 years for a cryptocurrency asset to complete a market cycle. However, this depends on several factors that can trigger a bear or bull market. These factors include monetary policy, inflation, macroeconomic factors, regulatory changes, market adoption, technological advancements, and even market sentiment.
The length of the cryptocurrency market cycle largely depends on the nature of the fiscal policies implemented by central banks and their impact on global economic conditions.
Explore dynamics related to market cycles
In the highly volatile environment of cryptocurrency tokens, predicting market cycles can be a difficult task. While investors can understand when prices rise or fall in a market cycle, it is still impossible to predict exactly when those rises and falls will occur.
Investors must therefore approach this challenge with a strategic mindset, knowing that cryptocurrency markets can defy traditional forecasting techniques.
Investors driven by their natural emotions (rather than data and logic) may attempt to time the market and squeeze every penny out of their investments, regardless of the risks involved.
Instead of getting caught up in market movements, here are some tips investors can use to time the market with a focus on long-term growth.
Think of yourself as a contrarian investor.
Contrarian investing is when clients embrace unique investments rather than following the crowd. In other words, you buy when other investors are selling their assets and sell when other investors are buying. Contrarian investors intentionally go against popular trends and prevailing investment sentiment. They often buy undervalued or unpopular assets when others are selling, and often sell them when others are buying.
Remember it is not led by a psychic
Successful cryptocurrency investing requires a combination of strategic insight and emotional intelligence. As highlighted above, the timing of market cycles is uncertain as it is greatly influenced by uncontrollable and spontaneous macroeconomic events.
Because investors cannot predict what will happen in the future, it is unwise to make investment decisions based on how they think the general market cycle will continue. Instead, you should strive to make forward-looking decisions that support your portfolio’s long-term goals.
focus on what you can control
Investors can’t control what happens in the markets, but there are some things they can control. These are the things they need to focus on the most.
· Diversification: The asset allocation of an investment portfolio is entirely within the investor’s control. They can diversify their portfolios to minimize volatility and protect against potential losses. This can also help you develop potential opportunities to profit from different market industries and sectors.
· Fees: Investors should consider the fees associated with their investments, as high fees generally reduce returns. Instead of choosing zero or low fee investment options, it is recommended that investors look for opportunities that justify the fees involved.
· Education: Investors must understand what they are investing in. Buying investments you don’t understand simply because they are cheap during a market downturn may be an unwise decision for your portfolio over the long term. If an investor is unsure about an investment opportunity or asset, the best option is to conduct market research or consult a professional market analyst.
conclusion
Understanding market movements helps investors avoid unwise decisions that result from looking at price movements in their investment portfolios.
Successful investors create investment strategies that take into account the peaks and troughs of market cycles while working toward long-term goals.
Understanding the stages of the digital asset market cycle mentioned above is crucial for strategic investing, allowing investors to make more informed decisions about when to sell, hold, or buy tokens.