Market Cycles
I’ll start by saying I am NOT a financial professional or advisor. I am simply a retail investor looking to learn the ins and outs of investing to become successful long term. I am a regular every day person, but have started to pay attention to certain patterns and cycles over time. I will never call investing easy, but it is a lot SIMPLER than most want you to believe.
This specific blog, I will outline a few aspects of investing, and what I have learned over the past few years. The 3 main things that I will cover are: Patterns, the Bitcoin Halving, and Emotions.
Patterns - It is important to understand patterns when it comes to investing. Patterns are not a fail proof way to predict the future, but they are one of the biggest indicators. If you are able to zoom out and look at the bigger picture, you will start to see some of these patterns. Again, patterns do not guarantee anything. Patterns tend to focus more on PROBABILITIES. When charts are following certain patterns, the probability of certain outcomes become greater under certain market conditions. It is important to note here that outside factors and market conditions play a factor and can “ruin” some patterns. For a deeper analysis of these patterns, check out this article by Investpedia: Chart Patterns
Bitcoin Halving - Staring at and analyzing charts may not be for everyone. So it is important to look for real world patterns also. This involves paying attention to real world events, when they occur, why they occur, and how people react to these events. The most important event I am referring to is the Bitcoin Halving. This refers to the block rewards for bitcoin mining being cut in half. The amount given to miners for verifying transactions is the “block reward.” Every 210,000 blocks (roughly every 4 years), the reward for verifying transactions gets cut in half. Historically, this has caused a supply shock, since the same amount of energy is now being used to earn half the reward. This generally has caused the price to go up historically due to less and less BTC being mined, but demand remaining the same or increasing.
Emotions - This is last on the list since it ties everything together, but is arguably the most important of them all. Understanding and controlling your emotions in investing is the number 1 reason you will make or lose money. Emotions have become so prevalent in investing, they have a full “psychology of markets” chart that breaks down all parts, which I posted below. Since I have paid attention to this chart and the overall markets, it has been wildly accurate. Even after seeing and knowing each stage, and what could happen next, emotions still do their best to take over. You read the articles that say “crypto is over” or “its different this time.” Then see another article about the United States launching their own crypto exchange. So now you think, how is the US government calling crypto a scam and predicting its death, but at the same time launching crypto exchanges? Everyone acts off of emotions, and the key players in the industry and world notice that. It is important to keep these emotions in check, and act solely based on analytics, not how you feel that day.
