How to understand the market cycle of cryptocurrency

Foreword: This paper analyzes the possible correlation between Bitcoin and other token assets in the encryption market. When the market is in different cycles, the tokens have different effects. For example, bitcoin has a significant blood-sucking effect when it exhibits parabolic growth. This article helps us understand some of the changes in the price of the encryption market, but it cannot be emulated as a principle of investment. Different factors are at work in each cycle. Gain a deep understanding of the risks of cryptographic assets, be cautious in making investment decisions, and not bluntly copy. The author, Reza Jafery, is translated by the "Lu" of the Blue Fox Note Group.

In the crypto-asset market, there are some coins that are positively correlated with Bitcoin, and some coins are inversely related to Bitcoin.

Positive correlation or inverse correlation depends on the market cycle in which Bitcoin is located. Therefore, the key to a (relatively) secure trading strategy is to understand the category to which the currency belongs and to be able to discern the beginning of a new market cycle.

The currencies that are usually positively associated with Bitcoin include Ethereum and Litecoin. It can be noticed that due to the rise of Bitcoin, there will be some growth in Ethereum and Litecoin. But when Bitcoin hits a record high, this relationship will change.

The key to long-term profitability is to understand how different currencies interact in different market cycles.


The trend of the altcoin is also related to Bitcoin, and when Bitcoin performs well, they perform well. But the altcoin and their relationship to bitcoin are actually much more complicated, because not all altcoins perform well. Many altcoins are “first pulled and then smashed”.

There are many different reactions to cryptocurrencies in the price changes of Bitcoin. After the rapid rise of Bitcoin: it may also be the time to buy the altcoin. Since a lot of money flows into the bitcoin from the altcoin, the price of the altcoin is extremely suitable for buying at this time. (Blue Fox Notes: Please note that in practice everyone has different understandings of tokens and the ability to withstand risks. The above strategies should be used with caution and should not be easily imitated.)

Look at how the currency interacts with each other and how to identify the market cycle of Bitcoin in order to maximize potential returns.

Bitcoin has a new high, why can Ethereum, Litecoin and other altcoins fall?

FOMO (missing phobia)

I personally think that this is the psychology of novices. When Bitcoin begins to break out, funds will flow from other currencies into Bitcoin. (Blue Fox notes: also known as the blood-sucking effect)

Investors have transferred their funds to Bitcoin because of the FOMO psychology, hoping to make a profit.

The problem is that bitcoin is not stable and volatile, and FOMO admission is often unsatisfactory.

FOMO violates one of the most famous trading spells in history:

“The best time to enter the market when you are full of blood.”

– Baron Rothschild In the past financial market history, there has never been such an upward trend.

Senior trader Peter Brandt recently discussed the history of Bitcoin on Twitter: "Bitcoin presents the fourth parabola since 2010. In my 45 years of life, I have never seen a parabola like this. Bitcoin is unique."

With this in mind, what you must understand is that a financial asset that violates rationality may allow you to make some irrational decisions, such as borrowing a loan, and all buying on Twitter will double the price. Altcoin.

Brand Awareness

No matter what you think about Bitcoin and all other cryptocurrencies, you can't deny that Bitcoin is by far the most popular and best known currency.

God, I can use Bitcoin and cryptocurrency with most people, and they can't tell the difference.

This means that when new funds flow into the market, as with all previous influx of funds, they are likely to invest their money in the currency they have heard the most.

Similarly, Ethereum and Litecoin also benefit from brand recognition.

How to use the market cycle to profit

We have already discussed several different scenarios, let's review them. It should be noted that all of these market scenarios apply only to bull markets. (Blue Fox notes: Please pay attention to the author's premise, do not blunt imitation.)

Scene 1: Bitcoin grows steadily, and the altcoin currency grows steadily

When Bitcoin grows steadily (although the stability of Bitcoin is not high compared to any other financial asset), there is a rising momentum for all cryptocurrencies.

We are currently in this state. Bitcoin has recently surpassed $10,000, and Ethereum and Litecoin are also slowly rising.

When the currency with the largest market value is growing steadily, see which currency is at the bottom. When Bitcoin was at this price last time, where are the Litecoin and Ethereum respectively, which one is more advantageous?

Scene 2: Bitcoin parabolic growth, altcoin falling

Whenever bitcoin comes out of the parabola, it will leave all the other coins far behind. Parabolic growth refers to bitcoin rising along a parabolic curve.

“Parabola is probably one of the most valued and sought after models. It can give investors the fastest and fastest return in the shortest amount of time. This mode usually finds you at the end of the trend or near the end. This mode is the end result of multiple fundamental plane fractures."

From Chart Patterns.

If you are in parabolic growth, then the parabola is great for you. But it is absolutely terrible for other assets on the market. When Bitcoin is parabolically growing, the market will be filled with FOMO sentiment, and everyone will sell the altcoin in their hands to buy Bitcoin: hope to catch up with the parabolic growth tail.

This means that the price of the altcoin has fallen.

Scenario 3: Bitcoin stagnates, altcoin growth

After the parabola, Bitcoin tends to stagnate. This stage is called "accumulation." Without enough upside or downside pressure to create volatility, investors are bored, and the altcoin begins to rise.

Investors are worried that funds will be stuck in Bitcoin, or that they will get tired of bitcoin, and the value of the altcoin will rise.

This is because when Bitcoin stagnates at the end of the parabola, the price of the altcoin has fallen and fell. Therefore, the price of altcoin may be extremely low and may be extremely underestimated.

If you have the ability to judge the market cycle, then you will get the corresponding return through the transaction.


Risk Warning: All articles in Blue Fox Notes do not constitute investment recommendations . Investment is risky . Investment should consider individual risk tolerance . It is recommended to conduct in-depth inspections of the project and carefully make your own investment decisions.