It is important to talk about where we are right now.
You can probably feel it yourself, the depression stage of the cycle categorised by fear, doubt, the reluctance to invest capital and general panic.
Do you know how far Amazon stock dropped in the tech bubble from January 2000 - September 2001 [20 months later]?
It dropped 95% – sound familiar?
During this time nobody wanted to touch it, the market could only think of negative reasons why the price would go down forever. Investors were pessimistic, and nobody had the courage to act.
Some companies died, forever, but what came next was the re-birth of something 100x bigger. It went from a tech bubble to the tech revolution. And you wouldn’t be here if, at some stage, you didn’t believe in the blockchain revolution. Now, we don’t know which companies will be the next blockchain Amazons, but we are looking for them every day. And we will find them.
While we move through this stage of the cycle, capital will be tight, and we need to be even more prudent with our investments. Keeping portions in cash, taking profits earlier than usual or making long term investments that you intend to hold for long periods of time.
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Price cycles around a trend. This is something we all know.
When using trends as forecasts for the future price of an asset you are simply extrapolating the past into the future and there is no guarantee that the previous trend will repeat exactly, but it may rhyme.
I believe they offer a good amount of insight into the flow of price, yet would not trust it, for example, to predict the exact dollar value of Bitcoin in 2021.
The below is a simple breakdown of the past trends as they were before the bulls took over and blew the price to crazy highs.
This phenomenon is in no way just related to cryptocurrency trading and investing. It happens in every market. Why? Because humans are involved in every market.
Firstly
You can see the % retrace marked in blue. And you can see the horizontal green box, which was the depression stage at the end of the 2015 bear market, duplicated to today’s market.
Secondly
You can see the two red trend lines. The highest of the two was the 2012-2013 bullish accumulation period before the major breakout at the start of 2013 and the second is the bullish accumulation period from the end of 2015 to the start of 2017 before the major breakout.
As you can see, the second accumulation trend was at a slower incline than the first, and I believe that was caused by a much larger collection of money in the pool.
From this data, I would make the assumption that the next bullish accumulation trend, after the depression period, will also be slower than the 2015–2017 trend. If there is a similar boom, the peak of that boom might reach near the bottom of the previous trend as we saw in December 2017.
Thirdly
You can see similarities in volume. I wanted to talk about this because the volume charts look similar across most exchanges that were trading Bitcoin during the last bear market. The amount of volume in both the bull market and bear markets of 2017 and 2018 was lower than the volume of the 2014–2015 markets.
However, the shape is the same:
- A build-up of Euphoria
- Mass Panic
- Uncertainty
- More Panic
- Unknown in 2019, and in 2015 we saw more uncertainty, or as I am referring to it: Depression.
Conclusion
There is no way that we can know for certain what is to come, and it is unlikely to repeat exactly however this picture does show us a clear picture on the past market performance in all times, across all emotions. It is a complete picture.
The depression cycle is always [not just in cryptocurrency] the most important time to be vigilant for new investments. While a lot of old projects will succeed, a lot that came through in the ICO boom are dying, new ones will be there to take their place.
You need to know what ones, and why.
Safe trading,
Boss Cole - Boss Crypto Trading Academy
