Mapping The Crypto Market Cycle - Part 7 (Phase 3 Begins?)
Interestingly, nothing much has changed since my last update on this study. This is despite the fact that the market experienced a massive liquidity/shakeout event on March 12th, 2020, due to the coronavirus panic. Even though I've been posting on here less, it hasn't impacted the accuracy of my analysis. In fact, if you go through my last two pages of recent posts, all my observations and implications have pretty much played out precisely how I expected, for the bullish scenario. This includes XRP's massive push towards the top of its downtrend channel, the weakness of Bitcoin dominance, VET's parabolic move, and more.
Here's my most recent update on the market cycle, which I wrote in January:
What's fascinating to me is how this model, which is an attempt to predict human behavior over time, has held true. Even global markets continue to push up in "value" while quality of life continues to decline for the majority of the population. This, I believe, is near the peak of an enormous asset bubble and economic shift. Thankfully, every time this has happened throughout history, we've become more emotionally self-conscious as a species. Now, with social media, we are able to literally look at our past selves in the mirror and feel shame. The consequences are much more emotionally scathing, so we must be held more accountable. And crypto is an effort to make us more financially accountable. The whole purpose is to solve the problem of trust. Now we have to see which direction humanity chooses as it eventually exits this crisis. Do we self-destruct and take the short road towards fascism, oppression, and violence? Or do we find solutions that continue our challenging transition into a global, collective, self-aware society? The fact that we are aware of our own complacency is already a step, but many won't see it that way.
The biggest question for me is whether or not cryptocurrencies will continue to increase in value over time (relative to their supply and the global economy) as humans make an attempt to take economic power back into their hands - or whether crypto is just part of the asset bubble, where the wealthy put their money into anything BUT money, in an effort to escape a system that continues to diminish the value of labor.
Now to the analysis
According to my chart, we could very well be ending Phase 2 of the market cycle. Phase 2 is characterized by sideways movement in Bitcoin as dominance drops slightly. Alts haven't performed quite as well as I drew in my chart (you can see my original projection in yellow, and how it's diverged). Bitcoin has pretty much performed exactly as expected, particularly if you completely ignore the March 12th event. Indeed, Bitcoin is starting to inch up and work on the highs from June 2019. Once those highs are breached, Bitcoin will confirm Phase 3, in which all cryptocurrencies start to do well, with alts continuing to outperform slightly. It should be noted again that alts did not truly go parabolic until Bitcoin started working on the all-time-high. This wouldn't happen until Phases 5 and 6. Meanwhile, I do think dominance can just continue to slowly decline towards the 50% level.
The past cycle for dominance:
My projection for the current cycle. Unfortunately TradingView wasn't able to save these charts, so I had to link them from earlier snapshots:
If we are indeed entering Phase 3, I expect it to only last a few weeks, during which Bitcoin makes a high above $14k, but not quite touching the all-time-high yet. Then, Phase 4 would be another long period of consolidation, during which all cryptocurrencies correct and find buyers at new support levels. Dominance would continue to decline slowly, instilling excitement in Bitcoin Maxis at the prospect of a bounce, and fear in altcoin holders. Here it is zoomed in:
There are many reasons to consider why Phase 3 could be beginning. First of all, Bitcoin has clearly broken out of consolidation. In my last Bitcoin analysis, I wrote about how the structure more clearly signaled continuation, rather than a top. This analysis ended up being correct, although there was no shakeout below $8K. Evidently, there were too many buyers at the $9.1K level. In addition, Ethereum has already made a new high since June 2019, and it happened VERY quickly. Currently, ETH and TOTAL2 are struggling at the same horizontal resistance, but price action looks stronger, and so far the rejection is being bought. You can see how important the $140 Billion level is for the altcoin market. Ultimately, it will need to blast through here to confirm a bull market:
There are some strong sellers up here on the daily. I'd like to see a close above the long wick from July 26th, which tapped the $125 Billion level.
I'm not at all surprised to see strong resistance here. The total crypto market cap got rejected precisely off the highs from June 2019. Ultimately, I want to see some consolidation above $300 Billion and a push higher. It doesn't need to happen right away, but I don't want to see this entire move retraced without strong dip buying.
In any case, I'm very curious to see how this evolves. For the record, I am finally somewhat substantially in profit on my crypto portfolio. My plan is to begin trading a portion once I see a larger impulse that takes us out of the bear market. Still not completely convinced, but I'm getting quite close. My posts are, in part, a constant evaluation of my own life decision to enter this market. It's a way for me to "figure out" whether human behavior can be predicted in a such a way, and what this means for our future. Will cryptocurrencies be part of a new paradigm? Who knows. All I'm doing is speculating and analyzing charts. This is meant for education, speculation, and entertainment only. This is not financial advice.
-Victor Cobra
Here's my most recent update on the market cycle, which I wrote in January:
What's fascinating to me is how this model, which is an attempt to predict human behavior over time, has held true. Even global markets continue to push up in "value" while quality of life continues to decline for the majority of the population. This, I believe, is near the peak of an enormous asset bubble and economic shift. Thankfully, every time this has happened throughout history, we've become more emotionally self-conscious as a species. Now, with social media, we are able to literally look at our past selves in the mirror and feel shame. The consequences are much more emotionally scathing, so we must be held more accountable. And crypto is an effort to make us more financially accountable. The whole purpose is to solve the problem of trust. Now we have to see which direction humanity chooses as it eventually exits this crisis. Do we self-destruct and take the short road towards fascism, oppression, and violence? Or do we find solutions that continue our challenging transition into a global, collective, self-aware society? The fact that we are aware of our own complacency is already a step, but many won't see it that way.
The biggest question for me is whether or not cryptocurrencies will continue to increase in value over time (relative to their supply and the global economy) as humans make an attempt to take economic power back into their hands - or whether crypto is just part of the asset bubble, where the wealthy put their money into anything BUT money, in an effort to escape a system that continues to diminish the value of labor.
Now to the analysis
According to my chart, we could very well be ending Phase 2 of the market cycle. Phase 2 is characterized by sideways movement in Bitcoin as dominance drops slightly. Alts haven't performed quite as well as I drew in my chart (you can see my original projection in yellow, and how it's diverged). Bitcoin has pretty much performed exactly as expected, particularly if you completely ignore the March 12th event. Indeed, Bitcoin is starting to inch up and work on the highs from June 2019. Once those highs are breached, Bitcoin will confirm Phase 3, in which all cryptocurrencies start to do well, with alts continuing to outperform slightly. It should be noted again that alts did not truly go parabolic until Bitcoin started working on the all-time-high. This wouldn't happen until Phases 5 and 6. Meanwhile, I do think dominance can just continue to slowly decline towards the 50% level.
The past cycle for dominance:
If we are indeed entering Phase 3, I expect it to only last a few weeks, during which Bitcoin makes a high above $14k, but not quite touching the all-time-high yet. Then, Phase 4 would be another long period of consolidation, during which all cryptocurrencies correct and find buyers at new support levels. Dominance would continue to decline slowly, instilling excitement in Bitcoin Maxis at the prospect of a bounce, and fear in altcoin holders. Here it is zoomed in:
There are many reasons to consider why Phase 3 could be beginning. First of all, Bitcoin has clearly broken out of consolidation. In my last Bitcoin analysis, I wrote about how the structure more clearly signaled continuation, rather than a top. This analysis ended up being correct, although there was no shakeout below $8K. Evidently, there were too many buyers at the $9.1K level. In addition, Ethereum has already made a new high since June 2019, and it happened VERY quickly. Currently, ETH and TOTAL2 are struggling at the same horizontal resistance, but price action looks stronger, and so far the rejection is being bought. You can see how important the $140 Billion level is for the altcoin market. Ultimately, it will need to blast through here to confirm a bull market:
I'm not at all surprised to see strong resistance here. The total crypto market cap got rejected precisely off the highs from June 2019. Ultimately, I want to see some consolidation above $300 Billion and a push higher. It doesn't need to happen right away, but I don't want to see this entire move retraced without strong dip buying.
In any case, I'm very curious to see how this evolves. For the record, I am finally somewhat substantially in profit on my crypto portfolio. My plan is to begin trading a portion once I see a larger impulse that takes us out of the bear market. Still not completely convinced, but I'm getting quite close. My posts are, in part, a constant evaluation of my own life decision to enter this market. It's a way for me to "figure out" whether human behavior can be predicted in a such a way, and what this means for our future. Will cryptocurrencies be part of a new paradigm? Who knows. All I'm doing is speculating and analyzing charts. This is meant for education, speculation, and entertainment only. This is not financial advice.
-Victor Cobra
