Understanding the three major rules of the crypto world cycle

If you don't go straight, you have to take a detour
In the crypto world market cycle, there will always be a big drop after a big rise, and a big rise after a big drop. The cryptocurrency market is like tides, always experiencing ups and downs. However, investors usually only see the fluctuation of cryptocurrency prices, but fail to realize that there is actually a causal relationship. The rising process accumulates energy for the subsequent drop, which eventually leads to the drop. Similarly, the drop process accumulates energy for the subsequent rise, which eventually leads to the rise.
The cycles will not be the same, they will only be similar.
History will not repeat the details of the past, but it will repeat similar processes. The crypto market always has ups and downs, very similar, but each rise and fall is different in terms of how high it rises and how deep it falls. This is because of the role of randomness.
So the overall trend of the cycle, that is, the general direction can be predicted, but the specific trend, that is, the magnitude of the rise and fall, cannot be predicted.
Less walk in the middle and more walk to the extreme
The crypto world market cycles around the basic trend line or moving average, and after the market reaches an extreme, it will always return to the center point or mean reversion.
However, after the market returns to the center, it will not stop, but continue to rush to the opposite extreme. So the crypto world market is either at one extreme or the other. The currency market will always ebb and flow, either rising to an extreme or falling to an extreme.
1. Next, analyze the crypto world cycle
The cycles of nature are quite regular. However, the cycles of economic activities, crypto world projects, and crypto world investment activities involving human participation are very irregular and prone to extremes.
Because human nature determines that these cycles either go to extremes or go to extremes. To study cycles, study people first. To study people, study human nature first, and the expression of human nature is psychological emotions.
2. Psychological cycle of the crypto world
The emotional fluctuations in the crypto world market are like the movement of a pendulum. This pendulum swings back and forth, forming an arc, and the center of the arc perfectly describes the "overall average" position of the pendulum.
But in fact, the pendulum stays at the center of this arc for a very short time, just a flash.
On the contrary, the pendulum almost spends most of its time swinging to the extremes, with an extreme point at each end of the arc. The pendulum is either swinging towards the extreme point or away from it. But whenever the pendulum approaches the extreme point, the inevitable result is that it will reverse direction and swing towards the center of the arc, sooner or later.
In fact, it is the movement itself of the pendulum swinging to the extreme point that provides the energy for the pendulum to reverse direction and return to the center point.
The crypto world investment market has also formed a working pattern similar to a pendulum:
From excitement to frustration;
From cheering and celebrating for positive news to worrying and feeling uneasy about negative news;
From high prices to low prices;
From greed to fear;
From optimism to pessimism;
From risk tolerance to risk aversion;
From trust to doubt;
From believing in the future value, to insisting on having tangible value now;
From eager buying to panic selling.
The swinging phenomenon from one extreme to another is the most certain characteristic of the crypto world investment world. The psychology of crypto world investors is like a pendulum, often swinging to one extreme or the other. Investors rarely stay in the middle and seldom follow the path of happiness and moderation.
From the other side of investment risk, the attitude of investors in the crypto world towards risk is also cyclical, from excessive risk aversion to excessive risk tolerance.
3. Market cycles of the crypto world
The market cycle of the crypto world is the most important market cycle.
The crypto world market cycle has three characteristics:
The first feature, from a multi-level perspective, integrates all other related cycles in the crypto world cycle, combined with the influence of randomness, forming the fluctuation cycle of the crypto world, which is not only influenced by other cycles but also affects other cycles. Simply put, the fundamental and psychological aspects determine the market aspect. And the market aspect in turn affects the fundamental and psychological aspects.
The second feature, in terms of volatility, prices will deviate significantly, because investors in the crypto world are not completely rational economic actors, their psychology and emotions will fluctuate significantly, so the buying and selling prices in the crypto market will deviate significantly from their intrinsic value, the opportunity for investment lies in this, and so does the risk.
The third feature, from the process point of view, both bull market and bear market have three stages. The three stages of bull market are:
A few people have insight into the improvement of the project's fundamentals, and the currency price has risen slightly;
Some people notice the improvement in the fundamentals, and the price of the cryptocurrency rises.
Everyone is convinced that the fundamentals are improving, and the price of the coin is soaring.
In reverse, it is the three stages of a bear market.
To summarize with the wisdom of Buffett's investment philosophy:
The first to act are those who have foresight,
The last ones to follow the trend are often the blind.
Why is there a crazy surge at the end of the third phase, it's like a tug-of-war between the two sides. In the final stage of a bull market, the sellers suddenly surrender and join the buyers' camp, resulting in a market frenzy. However, because there are no more sellers, the market eventually stops rising, and at the slightest sign of trouble, it begins to reverse and fall.
So often people say, 'As soon as I buy in, the market starts to fall.'
Because you are one of the last batch of people to 'surrender'.
4. Deal with the cycle in three steps
Understanding the three major laws of the crypto world cycle for one purpose: to cope with the cycle, use the cycle, and thus gain more profits.
In general, dealing with the crypto world cycle is just three steps: knowledgeable, courageous, and prepared.
Chinese people often say, 'have courage and wisdom.' In fact, wisdom comes before courage. Having courage and wisdom is not enough; you also need to be prepared in case of unexpected situations.
Insight - Where is the crypto world market in its cycle now? Only by seeing clearly now can we grasp the future.
To gauge the temperature of the crypto world market, key indicators are used to measure market valuation levels and whether market sentiment is overheated or too cold.
Market sentiment in the crypto world is very contagious. It is very difficult to stay sober when everyone else is intoxicated during a bull market.
To have guts - to be fearful when others are greedy and to be greedy when others are fearful, this is also a reflection of the wisdom of Buffett's investment in the crypto world.
We have understood that the market volatility in the crypto world is always cyclical. The higher the market rises, the greater the possibility of a fall, so we should sell early. Conversely, when the market falls, the higher it rises, the greater the possibility of a fall, so we should sell early. Conversely, the lower the market falls, the greater the possibility of a rise, so we should buy in a timely manner.
But it's easier said than done. In a bear market, everyone is in panic. How many people have the courage to buy in? In a bull market, everyone is greedy. How many people have the courage to sell and leave? But to succeed, it must be done in this way. No wonder successful investors in the crypto world, .
5. Insight - Where is the crypto world market in the current cycle? Only by understanding the present can we grasp the future.
Taking the temperature of the crypto world market involves using key indicators to measure market valuation levels, as well as whether market sentiment is overheated or too cold.
Market sentiment in the crypto world is very contagious. It is very difficult to remain sober while everyone else is intoxicated during a bull market.
6. Have the courage - to be fearful when others are greedy, and to be greedy when others are fearful, this is also a manifestation of Buffett's investment wisdom in the crypto world. From the perspective of risk-taking: the less cautious others are, the more cautious you should be.
We have understood that the market fluctuations in the crypto world are always cyclical. The higher the market rises, the greater the possibility of a drop, so we should sell early. Conversely, the lower the market falls, the greater the possibility of a rise, so we should buy in a timely manner.
But it's easier said than done. In a bear market, everyone is in panic. How many people have the courage to enter the market and buy?
In a bull market, everyone is greedy. How many people have the courage to sell and leave?
But to be successful, it is necessary to do so, no wonder that only a few people in the crypto world are successful investors.
7. Be prepared - Prepare for errors in three aspects.
The first mistake you made is something that everyone makes, because everyone is human.
The second is unexpected events from outside the market, such as regulatory policy changes, hacker attacks, macro crises, major technical vulnerabilities, black swan events.
The third is the market's own error, the market always maintains the wrong time longer than you can hold without liquidation! You analyze correctly, you do it right, but the market remains unrepentant until after you have been liquidated, then the market quickly corrects its error. You did not hold on until the moment of dawn, but died in the long dark night before dawn, because you did not expect the night before dawn to be so long and so unbearable, your ammunition and food were exhausted.
So the biggest secret to investing in the crypto world is to survive, not to be the winner, but to be the survivor.
For thousands of years, the rise and fall of dynasties has been repeated. As long as human society exists, this cyclical phenomenon of regime change will continue, because human nature will never fundamentally change, and it is also the core driving force for progress in human society, the crypto world is no exception.
Keep it up!