The mood of the cryptocurrency market isn’t static. It changes and goes in cycles.
We can see this in its bullish and bearish phases, in its repeating self-similar cycles, and in what I call “the cryptocurrency rotation” (where which coin or set of coins is hot changes). This concept is also similar to “market cycles” (where different cryptos or crypto as a whole go between bullish and bearish for a period of time).
Which strategies will work and which indicators will be useful can depend almost wholly on the mood of the market (which is in reality more like the collective mood of investors in the market).
The faster you can understand the current mood and detect when the mood has changed, the better you’ll do at investing and trading.
The one of worst mistakes you can make in crypto is being bullish on bitcoin in a cycle in which alts dominate (or vice versa). The market you thought you knew will change frequently, but cycles will return (they won’t be “exactly the same” they will be similar).
Base your short term strategy around the current mood, base your long term plays around fundamentals and long term patterns.
If you want to build a long position in a coin, wait until the mood has turned against it, then hold until it comes back into favor.
If you want to make short term plays, be bullish at the start of a new cycle and be wary towards the end of the cycle.
You’ll know when the mood changes, you’ll see it in the charts and can pick it up on social media. Did mania turn to panic? Is the word on the street that X coin will cause the flippening and Bitcoin will lose dominance? Is the media sharing dogecoin memes? Or is the media telling everyone the bubble popped? Or, is everyone just focused on the technology and possibilities of blockchain? That is the mood, how people talk, how traders trade, which sets of coins are doing what. I mean it pretty literally though, like how people have emotions and interests and their moods and interests change in cycles, so do markets. But even more than other markets, the global crypto market is one moody entity (a little manic depressive honestly).
Simply put, the market isn’t a static thing, it is moody and complex. It takes a nuanced theory of sentiments and a strong intuition to really get in tune with it.
Learn its moods and react to them, don’t think you know the market, you can only know it’s many different phases. If you pick up on an old phase coming back into play, consider what worked then and see if it plays out again.
The market has different moods, but those moods come in cycles and form patterns. Noticing all that can be extremely helpful.
TIP: If we just had giant correction, the next mood probably won’t be “another giant correction.” If Ether just went to the moon, the next moon likely won’t be “Ether goes to the moon part 2,” etc. Cryptos tend to go through different phases and do a “rotation,” they typically don’t just repeat the same phase twice in a row. Understanding the historic rotation is just as important as being able to sense the current mood.