Understanding market cycles: Why they’re important, and what they mean

Traditional market cycles

Traditional markets tend to have long market cycles that consist of rising periods, or “bull” markets, and falling periods, or “bear” markets. Looking at the US market between 1930 and 2017, the average bull market cycle lasted for around 9 years while the average bear market cycle lasted around 1.3 years.

Bellwether Bitcoin

Cryptocurrency differs from traditional markets in a few key areas, the most significant being the length of its market cycles, and levels of volatility, which are strongly linked. Looking at Bitcoin, the most established cryptocurrency, market cycles have tended to last around 4 years since the coin started actively trading around 2012.

Bitcoin has not seen this level of growth since 2017

Altcoin season

What also happened around the time that Bitcoin was firmly in the euphoric stage, however, was the beginning of a big rally in altcoins as new investors keen to capture the massive gains of early Bitcoin adopters poured into lower value coins. XRP (the token of Ripple) was one of the main beneficiaries of this in 2017, surging 1,260% in December, while a huge wave of ICOs, or initial coin offerings captured bags of new money.

The cycle to come

Since then, of course, Bitcoin has taken off again and is trading around $50,000 per coin. Meanwhile, altcoins are not faring too badly either (although we are not yet in an altcoin season, which is when 75% of the top 50 coins perform better than Bitcoin over the previous 90 days). Indeed, things are starting to look a little frothy.

About the Author

Justin is YIELD App’s co-founder. He has over 20 years of experience in investment banking, fund management, consulting and FinTechs. He specializes in financial product development, multi asset class arbitrage, and delivery of technology through strategic partnerships. Justin is a passionate advocate for FinTech regulation and increasing financial literacy across the globe. He has also made regular appearances on CNBC Asia’s business programs.

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