If you're new to investing in cryptocurrencies, understanding market phases is crucial to making informed decisions. There are four main phases of a market cycle that you should be aware of:
stealth phase
awareness phase
mania phase
blow-off phase
Stealth phase
During the stealth phase, there is little to no mainstream attention given to a particular cryptocurrency or the overall market. Prices are low, and only a small group of investors and enthusiasts are aware of its potential. This is a good time for early adopters to get in at low prices before the market takes off. This is also where smart money buys. It can be wealthy individuals or hodlers who went through a bear market and are still active in the crypto space.
Awareness phase
As the market gains traction, it enters the awareness phase. More people start to take notice of the cryptocurrency and the technology behind it. Prices start to rise, and mainstream media begins to cover the market. During this phase, it's important to do your research and make informed decisions based on the fundamentals of the cryptocurrency. In this phase, confidence starts to influence investment decisions.
Mania phase
The mania phase is when prices start to skyrocket, and everyone seems to be investing in cryptocurrencies. Fear of missing out (FOMO) sets in, and investors buy into the market with little regard for fundamentals. This is the riskiest phase, as prices may not reflect the underlying value of the cryptocurrency. If your hairdresser and taxi driver start to give you financial advice, you know what to do: take profits! 🤑
Blow-off phase
Finally, the blow-off phase is when the market reaches its peak, and prices start to decline rapidly. Investors who bought in at the mania phase begin to panic sell, causing prices to plummet even further. This is a time to be cautious and avoid making hasty decisions based on emotions. In a relatively short period of time, cryptocurrencies can retrace for 80 - 90%. So be careful and always have a plan!
If you're smart, you invest when prices are low and sell when prices are high 😝 Or you DCA into the market. If you're not familiar with DCA'ing, give us a follow and we'll explain it in one of our next articles!
In conclusion, understanding the different market phases is key to successful investing in cryptocurrencies. Remember to do your research and make informed decisions based on the fundamentals of the cryptocurrency, rather than getting caught up in FOMO or panic selling during volatile periods.
