There exists a Wall Street Cheat Sheet that depicts the natural psychology that investors go through during a market cycle, and frighteningly, Bitcoin and the rest of the crypto market appear to be following this course nearly exactly after the latest collapse.
Is the crypto market entering the anxiety phase, with real panic, capitulation, anger, and depression still yet to come?
Where is Bitcoin in the Current Crypto Market Cycle?
The crypto market, like any market, is cyclical. But where we are in that cycle is completely subjective. Only in hindsight will investors know the truth.
To help understand the current market psychology phase in each cycle that the market may be in, a “Wall Street Cheat Sheet” was developed, depicting the anatomy of a market cycle from an emotional and psychological standpoint.
Related Reading | Is the Coronavirus The Black Swan Event That Crushes Crypto?
Crypto investors have long been convinced that last year’s rally was the market moving from disbelief into hope, but those hopes have since turned to extreme anxiety, now that Bitcoin and the rest of the crypto market is hanging by a thread, following a complete and utter collapse of these assets over the last 24 hours.
Fears of the coronavirus are spilling into every aspect of life, hindering travel, canceling major events, infecting hundreds of thousands, and showing no signs of slowing in spreading.
It’s caused the stock market to plummet, with the Dow setting a record for its worst single-day since 1987.
Bitcoin also set a historic single-day record for its biggest drop, falling from $7,500 to as low as $3,800 in less than 24 hours.
A potential liquidity crisis was to blame for the severity of the drop, but now that is has happened, people aren’t as confident in the future of Bitcoin and crypto as they once were.
Bitcoin’s halving was said to send the asset into a new bull run, but with a recession around the corner, and the economy in turmoil, no asset is safe, even ones designed to be a safe haven.
If the recession is to stand for the foreseeable future, further decline in the crypto market may be a given.
Should further decline occur, Bitcoin and the rest of crypto could continue to follow the Wall Street Cheat Sheet, plummeting further and causing panic, capitulation, anger, and depression to set in.
At that point, it may be years before Bitcoin recovers, ending the secular bull market and sending the asset into its first true bear market.
The asset’s logarithmic growth curve has now been violated, as well as a seven-year-long trendline, however, the asset’s most serious valuation models, such as the Power Law Growth Corridor and Stock-to-Flow model, continue to hold up.