Market cycle analysis screamed ‘take profit’ ahead of May 19 sell-off

Over the past few weeks, there have been many indicators of market weakness, which have led to a decline in Bitcoin and alt-coins. To help readers identify potential areas of concern, we have added a graph that shows trend analysis, measured by a fractal trend analysis algorithm. The red line on the chart is a trend reversal that has just taken place. The green line has just crossed into the negative territory, which indicates that a trend reversal is likely.

If you’ve ever wondered why some traders make the same mistakes repeatedly, there is a fairly simple reason: behavioural biases. In particular, some traders tend to think and act in a way that is similar to the average trader, which is called the “herding” effect. This is the reason why the majority of traders are currently forecasting a technical “buy signal” in Bitcoin (BTC) and other major cryptocurrencies, according to a BitMEX research report.

In the days leading up to May 19, the average daily volumes and asking prices for Tethers were increasing sharply, suggesting that traders were anticipating a large increase in the price of $USDT. This is uncommon during a market correction, so it’s worth taking a closer look at the associated data.. Read more about xrp news and let us know what you think.

Welcome to the Cointelegraph Market’s weekly newsletter. This week, we identify emerging trends in the cryptocurrency sector to broaden understanding of market cycles and better prepare readers to take advantage of the microcycles that regularly occur in the broader market structure. The cryptocurrency industry has a reputation for volatility and rapid change, and these characteristics were on full display in May when a sharp drop in the price of bitcoin (BTC) from $60,000 to $33,000 led to a mass exodus that wiped out $1.2 trillion in total market capitalization. While many in the ecosystem attributed the downturn to things like negative tweets from influential and powerful figures like Elon Musk or another announcement that the Chinese government is banning bitcoin, more experienced traders and analysts warned of the possibility of a significant pullback weeks before the collapse began. The rapid price increase in 2021 showed some classic signs of bubble-like behavior: Alarm bells were ringing about overbought prices, while Uber drivers and grocers were eager to give their opinions on what the next big move would be. With this in mind, it is a good time to look at the different phases of the market cycle to better understand what the market has been through so far and what we can expect in the coming months and years.

Four phases of the market cycle

The four main phases of the market cycle that all traders should be familiar with are the accumulation phase, the uptick phase, the distribution phase and the decline phase. Phases of the market cycle. Source: Investopedia The accumulation phase occurs after the market bottom and is characterized by innovators and early adopters buying assets based on their long-term potential before significant price movements occur. This phase could be seen in the cryptocurrency market from about December 2018, when the price of BTC fell below $3,500, and lasted until October 2020, when the price began to rise well above $12,000. 1 day chart of BTC/USD. Source: Bitstamp The appreciation phase really started to heat up in December 2020 and lasted until January 2021, when BTC and the decentralized finance (DeFi) sector caught the world’s attention and total market capitalization rose to a peak of over $2.5 trillion in May, when the distribution phase began. Total capitalization of the cryptocurrency market. Source: CoinMarketCap In the distribution phase, sellers begin to dominate and bullish sentiment is mixed in, pushing prices into a trading range. The phase ends when the market changes direction. As Investopedia notes, some of the typical chart patterns currently being seen are the double and triple tops, as well as the familiar head and shoulders patterns that were shown by the BTC as warning signals and noted by technical analysts prior to the recent sell-off. $BTC constitutes the Head & Shoulders model. Has the bear market begun? #Bitcoin #Cryptocurrency pic.twitter.com/E86WwcCKsX – K A R N A (@iamrajankarna) 8. June 2021 Like the 2017-2018 bull market, the price of BTC hit a new all-time high (ATH) and then began to decline, rotating funds out of bitcoin and into the altcoins market and reducing the total market capitalization May 12. to a record $2.53 trillion. For the astute crypto trader, this pattern was a sign of approaching a downtrend and cautious profit taking while BTC hovered between $40,000 and $60,000 and altcoins hit all-time highs, preparing to wait out the dip and buy tokens at a discount during the next low.

Use of appropriations during the accumulation phase

With the market experiencing a significant downturn and continuing to search for a price floor, it is a good time to monitor price action to find good entry points for profitable projects. Perhaps the most famous chart describing a typical market cycle is the Psychology of the Market Cycle Wall St. Cheat sheet. This pattern has been observed in all kinds of markets, from stocks and commodities to cryptocurrencies and real estate. Phases of the market cycle. Source: A checklist on Wall Street. If you look at the bitcoin chart, you’ll see a similar price pattern that began in late 2020 with a possible period of disbelief starting in November. The early rise in January resembles the hopeful phase of the chart above, followed by a rise over several months to a euphoric all-time high in April. 4 hour chart BTC/USDT. Source: TradingView The price then dropped from $64,000 to $47,000 before returning to $53,000-60,000 when complacency struck. The sell-off in May carried the market through periods of fear, denial, panic and capitulation, and the ecosystem’s reaction to Musk’s tweets generated considerable public anger, among other forces that exerted downward pressure on the market. Now it’s a matter of coming to terms with the depression caused by a significant drop in portfolio value and deciding whether the market has bottomed out, meaning this is a good time to reallocate resources, or whether it’s better to sit back and wait for new developments. Big price rallies at this point are often viewed with disbelief, as a rally for suckers – so the cycle is over and we are back to square one. Does this mean it’s a good time to collect tokens for your favorite projects? Unfortunately, there is no guaranteed right answer to this question, and each investor must decide for themselves. With previously coveted tokens now much cheaper than a month ago, this could be a good time to dollarize costs and return to better long-term options for the next growth cycle.

Cycles in the cryptocurrency industry

The typical cycle presented here can be applied to the market as a whole, but also to individual tokens or token sectors. A prime example of this is the rise of decentralized finance over the past year, which has taken the cryptocurrency market by storm with the emergence of popular decentralized exchanges like Uniswap and lending platforms like Aave. Total market capitalisation of the DeFi sector. Source: CoinGecko As the above graph shows, the WiFi industry as a whole has gone through its own market cycle, which has coincided with its growing popularity and usage in the ecosystem. A similar pattern was seen in the growth of non-tradable tokens (NFTs) in 2021, but the timing was different, underscoring the idea that the sectors are evolving together and pointing to the potential benefits of a sectoral approach to investing in cryptocurrencies. ENJ/USDT vs CHZ/USDT vs AXS/USDT vs MANA/USDT Source: TradingView To take advantage of these opportunities, traders are sometimes forced to take a contrarian approach. The accumulation phase is often marked by a drop in sentiment, but the best time to sell is during the distribution phase, when sentiment is at its highest and most traders move forward hoping to make a lot of money. In terms of the current market outlook, it may be best to adopt a wait and see approach and keep some dry powder in reserve to take advantage of any sudden sell-off. Whatever you decide, make sure you do your own research and set up a risk management process, as the historically volatile nature of the cryptocurrency market doesn’t seem to indicate that this will abate any time soon.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph.com. Every investment and every transaction involves risk. So you need to do your own research before making a decision.The market has been increasingly volatile, with the cryptocurrency market seeing record highs and lows, but it appears the tide may be turning. After an uptick in the last few days, the market has been marked by a strong sell-off. Since this is what we have been seeing in the past, we must look to the past to see what the future holds.. Read more about xrp price prediction and let us know what you think.

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