The first phase of a market cycle is accumulation. It starts after the previous cycle ends, indicated by stabilizing prices, denoting a beginning of a new cycle.

At this phase, the 'innovators' and 'early adopters are the ones who begin to buy, while the overall interest in the market remains low. Some market participants would see the accumulation phase as an uncertain time to enter the market because it’s difficult to infer if the crypto’s value will trend down. Hence, the market volume is typically lower than average.

This phase usually attracts long-term holders who are looking to buy and hold for quite a long time because they’re optimistic that there will be a start of a lucrative bull market. But, short-term traders would need to have patience because this phase could last unpredictably – from weeks to months or even years.

Characteristics of the accumulation phase:
  • Low price volatility.
  • Low trading volume.
  • Dominated by uncertainty, thus attended by innovators and early adopters.
Accumulation Stage Crypto Market Cycle
Markup Stage Crypto Market Cycle


The Markup phase is also commonly known as the “Bull" market phase where the market has been stabilized for a while and is beginning to have an increasing price at an increasing rate.

More market participants are becoming interested and optimistic about the future of the market. They enter the market as the market receives positive media overage. As a result, demand increases and exceeds supply, causing asset prices to appreciate in value.

This phase usually attracts long-term holders who are looking to buy and hold for quite a long time because they’re optimistic that there will be a start of a lucrative bull market. But, short-term traders would need to have patience because this phase could last unpredictably – from weeks to months or even years.

Characteristics of the Markup phase:
  • Escalating price trend.
  • Optimism towards the market.
  • Increasing trading volume.
  • Buying pressure on the 20 day moving average which forms into a support band


The third phase of the market cycle is identified by a period in which excitement sentiment from the previous Markup phase shifts into a mixed sentiment – a separation between greed and fear.

Some participants are still optimistic that the bull market isn't over, hence they keep on buying. On the other hand, some participants are in fear that a bear market is coming, thus they try to secure profits by selling off their assets as they're uncertain if the uptrend will continue.

As result, prices fluctuate and progressively reach an equilibrium peak that can come and go quickly, moving to the next Mark Down phase.

Characteristics of the Distribution phase:
  • The mixed sentiment of hope, fear, and greed.
  • Sellers begin to dominate.
  • Increased trading volume without price increase.
  • Sideways trading action
  • Wycoff distribution pattern more
Distribution Stage Crypto Market Cycle
Mark Down stage Crypto Market Cycle


This final phase of the cycle is the most depressing for those used-to-be-optimistic holders.

This starts when supply outweighs demand, and the market outlook becomes increasingly negative. Many choose to still hold their investments and refuse to let go even though their investment's value has fallen below what they paid for. But, at a certain point where the market dropped 50% or even more, they'd give up.

Although this period is thrilled with fear and panic, many need to remember that the Markdown phase doesn’t last forever. There’d usually be a new crypto market cycle, or another markup phase afterward.

Characteristics of Markdown phase:
  • Decelarating price chart.
  • Panic and anxiety as the dominant sentiment.
  • Reduced interest in crypto market news and social media platforms.
  • Selling pressure on the 20 day moving average which forms into a resistance band


What factors would affect the crypto market cycle?
What are the drivers that could create a new phase or end an existing one in a crypto market cycle?

These factors affecting a traditional market cycle could also impact the cryptocurrency market:
  • Political upheaval.
  • Interest rates.
  • Legal environment.
  • Technical indicators.
  • A general downturn on risk type assets.
  • Supply and demand.

But one of the most important drivers of the crypto market cycle is the Bitcoin Halving.

What is the Bitcoin Halving?

The Bitcoin halving, which happens roughly every 4 years, refers to an event when the mining reward is cut in half. This rule was established at inception of the Bitcoin blockchain and is a fundamental principle driving the deflationary nature of the asset (the reason why it increases in value with time). Satoshi himself (founder of Bitcoin) put this into effect because of his view of rampant money printing and greed that took place during the 2008 financial crisis.

The overall effect of the halving is that it reduces the rate at which new Bitcoins are created, hence it slows down the available amount of new supply.

When demand for Bitcoin stays strong (or increases), Bitcoin Halvings would push the Bitcoin price higher due to the perceived lack of market supply. Based on history, Halving leads to a new markup phase in the market cycle.

For example, the first Halving in 2012 saw the Bitcoin's price rise from $12 to roughly $1,150 within a year. The next halving event happened in July 2016 where the price rose from $650 to almost about $20,000, which eventually lowered down to $3,200. At the time of writing, the most recent Bitcoin Halving was in 2020, which saw its price to reach a value of $69,000 from nearly $8500.

Note that Bitcoin's inventor Satoshi Nakamoto decided that only 32 Bitcoin Halvings would ever exist – there will be no more halvings after that as the maximum supply of 21 million Bitcoin will have been reached.

Other Crypto Market Cycle Drivers

There are additional unique factors that can specifically affect the crypto market, such as market psychology and notable influencers.

It's important to note that these factors don't necessarily change the price direction of assets in the market cycle, the cycle itself is normally played out in 4 year lengths. These factors add fuel to the already established momentum of the market. For example positive news in a bull market is overblown and forces prices much higher than the same news in a bear market. In fact, positive news in a bear market often hardly shifts the market at all whereas negative news in a bear market is similarly overblown and makes the market panic forcing prices much lower.

Market momentum cannot easily be shifted so determine where you are in the market cycle before responding to any of the following drivers.

Market Psychology and Crypto Market Cycle

Excessively positive market segment (e.g. extreme greed) can make an asset overbought. An example is the Bitcoin bull market of 2017 from January to December, it rose from roughly $900 to a high peak of $20,000. During the rise, market sentiment became increasingly positive, leading myriads of new investors to enter the market and be trapped in the excitement of the bull market. Excessive optimism, greed, and ‘Fear Of Missing Out’ swiftly boosted the price – until it didn't.

The reversal phase began in late 2017 and 2018 when a downward price trend occurred. Some people insisted on HODLING (i.e. crypto slang for 'hold on for dear life'), yet the market continued to plunge and everyone was panicking. As a result, many sell out their high-cost Bitcoin asset at the bottom price and suffer huge losses.

Notable Social Influencers and Crypto Market Cycle

Elon Musk is one of the social influencers who can change the crypto market cycle. The billionaire was able to switch up and down the prices of crypto assets like Bitcoin and Dogecoin, only through a less than 280-character tweet.

In May 2021, when Musk tweeted that Tesla would no longer accept Bitcoin as payment due to environmental concerns, the price dropped by around 15 percent. But when in June 2021 he tweeted that Tesla would re-accept Bitcoin once miners moved to clean energy usage, the crypto price increased up 8 percent. Further, his tweet about Tesla possibly accepting Dogecoin for merchandise payment caused the Dogecoin price to rise by 15% in January 2022.

Not only tweets, but influential Youtube channels and podcasts can also affect the crypto market cycle. ‘BitBoy Crypto’, or Ben Armstrong, is one of handful influencers who offers advice on cryptocrurency. Although his advice is controversial as some critics think that it’s dramatic and groundless, many of his followers follow his prediction upon crypto values. Other popular channels also have many thousands of followers and can easily affect the price of small-cap cryptocurrencies.

It would be easy to pump and dump these coins and viewers/listeners should be on their guard whenever an influencer does any one or more of the following:
  • Tells you that there is very little risk in the coin
  • Doesn't answer comments asking whether they have an interest in the project
  • Shows all the positives and none of the risks
  • Does not talk about the tokenomics of the coin
  • Doesn't discuss the background and credentials of the founders of the project

CHAINOMETRY simplifies your crypto trading decision

Some argue that the general rule of thumb is to buy at the Accumulation phase because prices stop falling. Investors should hold and wait during the Markup phase, then sell at the highest peak.

Smart crypto investors are able to recognize different phases of the crypto market cycle and make the best decision to maximize profit.

We know that identifying particular phases of a market cycle is not always straightforward. CHAINOMETRY’s analytical tool that’s already included in our tax accounting software helps you make a better trading decision.

Powered by real-time data, our analytical tool allows:
  • You to keep track of your trading performance in every market cycle of various trading assets, like Bitcoin vs. Gold vs. Nasdaq. We place every trade you've made and 'simulate' it on another market to see how you would have done.
  • You can see whether you would have been better off trading on a different market or just simply buying and holding.
  • You can also see how much you’ve gained (or lost), and how you’ve made trading decisions over time.

No other crypto tax software gives you this power. The good news is, all of those are included for free.

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