The Bitcoin price rises and falls based on market expectations and disappointments. You can’t tell if it’s a bullish or bearish cycle until afterward. Do you know how to distinguish between a bull cycle and a bear market rally?
The price of Bitcoin is a complicated subject. The crypto community is usually not very rational about it. On the contrary, they tend to get very excited about everything that has to do with price. People only listen to what is convenient for them. In this space, everyone is incurably bullish, even though this market clearly varies. Up and down. But due to bias, the ups are magnified and the downs are ignored. The collective mood is bullish. And the bearish view is not only despised in many cases, but is seen as an insult.
To a large extent, the bitcoin community is a child of the Internet. It is a community that is made up mainly of minorities that have been trained and educated on social networks. It is a kind of digital tribe, where there are shared leaders, beliefs, values and culture. And where, in general, it acts as a block. Deep or critical analyzes are not the most abundant. In general, average users are limited to repeating slogans and set phrases. If you go to any forum where the price is discussed, what you will see are phrases like “To the moon!!!” Or things like that. It looks more like a football game, where the fans cheer on their team, than a valuation of a variable income asset.
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Have you ever wondered why the price of Bitcoin changes so much? Why does it sometimes go up like a foam and other times go down like a stone? Is there a conspiracy against the crypto community? Is it that fate plays tricks on us? No, dear reader. It’s nothing like that. It’s just common sense. The price of Bitcoin is not fixed. You can go up. And you can go down. Because it depends on supply and demand. And supply and demand can vary due to many factors. You shouldn’t take it personally. It is normal in any market. The price is volatile. It’s not the end of the world.
Because it’s volatile, that means it’s sometimes overvalued and sometimes undervalued. Sometimes it’s cheap. Sometimes it’s expensive. And the “expensive” or “cheap” of the price is not defined by looking at the past. In fact, it is defined by looking to the future. Because if the person buys today, it is because he expects the price to increase. That’s because the profit is in the difference between today’s purchase price and tomorrow’s sale price.to. And the investor gets into it for the benefit. Or not?
This means that if you think that the price is going to rise, it is because there is evidence that in the future there will be more people who want to buy and it is a good time to buy. And if you think that the price is going to go down, it is because there is evidence that in the future there will be fewer people who want to buy and it is a good time to sell. Simple as that. The price of Bitcoin does not depend on what you want, but on what the market wants.
Do you know how to distinguish between a bull cycle and a bear market rally? Well, me neither. It is practically impossible to know at the moment. We usually know this in hindsight. In other words, when it is already too late. In hindsight, if the correction does not erase the gains, but surpasses them with a new high, the trend could be said to be up. But if the price goes up, but on the correction the gains evaporate and we go back to where we started or at a lower level, it was a bear market rally.
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In other words, the fact that the price goes up a lot is not proof that we are at the beginning of a bullish cycle. Because? Because even in the most bearish cycles there are always moments in which the price seems to contradict the trend. Do you remember 2019? During the first half of the year, the price of Bitcoin began to rise. The great illusion was, among other things, the launch of Facebook’s digital currency. However, in the middle of the year, the price began to fall due to disappointments. In June and July, the price had gone up quite a bit. And we were all celebrating. However, in December, at the end of the year, we were practically at the same level as 12 months ago. Was it a bullish year? Was it a bearish year? Was it a year of stagnation or a sideways trend? Now, in hindsight, we know it was a seesaw.
Do you want to know how to make decisions today? Well, the first thing you have to do is a forecast. In other words, an estimate. How do we make an estimate? Shall we go to the Reddit forums? Shall we go on Twitter? What we are going to find there are phrases like “To the moon!” That are very good to cheer us up, but they do not help us to analyze the situation in some depth.
I think the most sensible thing to do is try to predict what will happen to demand and liquidity in the coming months. whatWill the demand be higher or lower in the second half of the year than in the first? That is the big question.
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An interesting fact that we can consider in this reflection is the volume. The volume has been relatively low. And we’ve had some increases driven mainly by small retailers. In other words, old bitcoiners have come back and bought back. What is great. But now we have to talk about the great absentees: new money and institutional money.
So, one could say that the Bitcoin price took advantage of the big tech rally, for one thing. And, on the other hand, an army of tweeters, redditers, youtubers, were activated to mobilize the base. The militancy was activated. But the general public was not part.
Recession? What recession? We all know that this is inevitable. The question is not whether there will be or not, but how much it will hurt us. And a lot, surely. Because a perfect storm is coming: less income, more unemployment, more inflation, less productivity, more debt, more conflicts and more chaos. What can we do? Take refuge in past glories, hoping that history repeats itself in detail? Let’s not be naive. Bitcoin has never faced a crisis like this. whatPessimistic or optimistic? Neither one nor the other. What there is is uncertainty. And in the face of uncertainty, it is better to be cautious and prudent.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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