Understanding market cycles is probably one of the most important skill sets when it comes to crypto investing. If you don’t clearly understand why they are important and how to change your trading strategy to account for them, you will probably lose most of the gains you’ve made during the recent bull cycle.

I learned the importance of market cycles the hard way. Gains that I made during the 2016-2017 bull cycle vanished during the bear market of 2018-2019.

Looking back, I think that I should have started fixing some profits early and been more conservative when the market turned bearish in order to have  more capital to deploy when the market started recovering.

In this email, while so many coins are near their ATHs, I want to talk about market cycles. Hopefully, this knowledge will help you learn from my mistakes and will protect your profits in the long term.

Bitcoin is going up; alts are mooning! Will this last forever? NO!

Historically, all the markets are moving in cycles. It does not matter whether you are trading stocks, commodities, cryptocurrencies, or real estate. Asset prices cannot always go up. There will be times when they will go down.

A good indication of this is S&P 500 and NASDAQ Composite Indexes. Although the overall trend has been up for the last 100 years, there have been bearish times when market prices were going down during prolonged periods.

S&P 500 Index Chart. Source: macrotrends.net

NASDAQ Composite Index. Source: macrotrends.net

Bitcoin is trading exactly the same way: every new bull cycle is repeatedly followed by a bear cycle. For Bitcoin, this was the case for the last ten years, and I am sure it will continue.

Bitcoin Price Chart. Source: coinmarketcap.com

Currently, we are clearly in a bull cycle, prices are increasing, and most likely, you are making gains. Everyone is happy, and many of you (especially those who joined crypto not long ago) think it will last forever.

The problem is that it will NOT last forever. As I already mentioned, markets (especially crypto) are moving in cycles, and there will certainly be another bear cycle.

During the bear cycle, you should become a much more conservative investor. You don’t want to HODL shitcoins (they will not moon 100x), invest in questionable projects, and have no Bitcoin and cash.

The problem with many novel traders is that they don’t follow the above rules during the bear cycle and eventually lose all of their money.

Your main goal during this period is not to make money. Your goal is to protect the gains that you’ve made during the previous bull cycle. The more you save, the more you are going to make during the next bull cycle.

Yes, crypto is a long-term game, but trust me, it pays off, if you apply the following basic principles.

How to spot the start of the bear cycle?

There is no straightforward strategy for doing this. However, I suggest doing three things.

First, and probably most importantly, just look at the Bitcoin price chart daily (daily time frame), and ask yourself where it is heading. If the price is going down for several weeks, maybe it is time to start thinking about adjusting your strategy.

Second, skim the news daily. If sentiment is bearish, this could be a sign that the market is starting to cool off.

Third, look at the on-chain analysis. If traders start sending their bitcoins to exchanges, it is probably a good time to start selling.

As seen from the chart below, more and more Bitcoins are leaving exchanges at this point, which means the bull rally will likely continue.

BTC Price (Green) vs. BTC Supply on Exchanges (Purple). Source: santiment.net

The bear market hit. Should I forget about crypto for another 1-2 years?

The answer is—absolutely not. This is a good time to spend even more effort researching and finding projects to invest in when the new bull cycle starts. Some of SIMETRI’s best recommendations came out of the previous bear market.

People who continued researching the space when the market was crashing were well prepared for a new bull cycle and made their gains.

So stick around, and it will pay off.

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Our research team at SIMETRI is also constantly sharing alpha. So feel free to follow me: Alexander Mardar, and my colleagues: Anton Tarasov, Sergey Yakovenko, and Nivesh Rustgi.