4 Crypto Market Phases – An in-Depth Look

5 September 2022

Did you hear one of your friends mention that there are multiple crypto market phases and are now wondering what that’s all about? If so, then you’ve come to the right place. This guide will go over all the different crypto market phases and tell you everything you need to know about each one. We will also share some tips on how you can trade for maximum profit in each phase.

Without any further ado, let’s dive right in!

Introducing the Four Crypto Market Phases

In total, there are four crypto market phases:

Bull
Bear
Accumulation
Distribution

Let’s talk about each one separately, so that by the end of this post, you’ll have a better understanding of how the crypto market works and how to make money no matter which phase it’s in.

What Is a Bull Market?

Simply put, bull markets are periods of time where the prices of assets are continuously going up. The mood is generally optimistic, and investors are bullish on the future of the asset.

The crypto world has seen many bull market phases and each one is bigger than the one before it.

How to Trade In a Bull Market

So how can you trade in a bull market? Well, there are a couple of things you can do. You can buy the cryptocurrency of your preference outright, or you can invest in a company that’s related to it. For instance, if you think the price of Ethereum is going to go up, you might invest in a company that manufactures mining equipment specifically used for Ethereum because as the price of the token goes up, so will its usage and subsequently the worth of the equipment manufacturing company.

All that being said, you should be aware that just because the prices have been going up for a while doesn’t mean they will continue to do so. Every bull phase is followed by a bear phase, which is what we will discuss next.

What Is a Bear Market?

In contrast to a bull market, a bear market marks a fall in the price of cryptocurrencies which leads to most investors selling their holdings. As more people sell, the price falls even further, creating a downward spiral.

This can be a difficult time for traders, as it’s often difficult to make money in a bear market. However, there are strategies that can help you make money even during this downward phase.

How to Trade In a Bear Market

Many experts suggest that it’s usually best to stay away from the market altogether until things start to look more bullish.

But that doesn’t mean you can’t make money during a bear market. In fact, there are a few strategies you can use to make profits even when the market is trending downwards.

One strategy is short-selling. This is when you sell a security you don’t own, with the hope of buying it back at a lower price and making a profit. You can also look for coins that are overvalued and wait for them to drop in price before buying in. Furthermore, you can short a token—bet against it—that you believe is overpriced and will soon lose its value.

What Is a Distribution Phase?

In simple terms, a distribution phase is a period of time when the sellers start to dominate the market activity. The overall trading momentum slows down as most people have already sold their tokens.

How to Trade In a Distribution Market

As a trader, it’s important to know how to trade in a distribution market. Here are a few tips:

Be prepared for a sell-off. When the distribution phase starts, prices will most likely drop, so you’ll need to be prepared to sell at a moment’s notice.
Watch out for resistance levels. As prices drop, they’ll eventually hit a resistance level—that is, a point where they can’t go any lower. This is where you should start thinking about buying in.
Find good entry points. It’s tricky to find good entry points during a distribution market, but it’s not impossible. As always, do your research and wait for the right moment to strike.

To sum up, you need to be very strategic. Make sure you’re only trading with money that you can afford to lose, and don’t go in all in on any one trade. Be patient and wait for the right opportunity. When the market does turn bullish again, you’ll want to be ready to take full advantage of it.

What Is an Accumulation Phase?

The accumulation phase takes place before an uptrend. During this phase, a lot of money is simultaneously entering and leaving the market. The end of this phase is marked by the turn of the market sentiment from negative to neutral.

How to Trade In an Accumulation Market

Imagine you’re in an accumulation market. What do you need to do to succeed?

Well, the first thing you need to do is find good entry and exit points. In an accumulation market, there’s usually a lot of sideways movement, so it can be tricky to find the right time to buy or sell. Another thing you need to pay attention to is volume. In an accumulation market, the volume will be low as investors patiently wait for the right opportunity.

So if you see a big spike in volume, it’s probably a good time to get out.

And finally, remember that patience is key. An accumulation market can last for months or even years, so you need to be prepared to hold your coins for a long time. We recommend reading this article to learn more on this matter.

How Long Does Each Crypto Market Phase Last?

Here’s how each crypto market phase lasts:

According to this report by Forbes, the average bear market lasts for 289 days.
There’s no average for the bull market. But the last one went for around three years.
Just like the bull market, there’s not enough data to calculate a reasonable average for the accumulation phase. However, the longest one lasted for a total of 287 days.
The distribution phase can last anywhere from a couple of weeks to a couple of months.

The Best Phase for Buying and the Best Phase for Selling

While the best phase to buy is the accumulation phase, the best phase to sell is the distribution phase. During the bull phase, prices are increasing and it’s generally not a good time to buy. And during the bear phase, prices are decreasing and it’s not a good time to sell. But one thing to note here is that this is general advice and different situations may call for different actions.

None of the four phases is set in stone, and each one can vary depending on the specific cryptocurrency we’re talking about. So make sure you do your research before making any investment decisions.

We recommend reading this guide to familiarize yourself with the day trading rules of the crypto market.

The Key Takeaway

Now that you have a basic understanding of the different crypto market phases, here’s the key takeaway for each phase.

Bull phase: During this phase, it’s best to get in early on cryptocurrencies that the experts believe are going to see a significant increase in market price. Alternatively, you can invest in a company or project whose success is directly correlated to the market price of the token you believe is going to increase in the bull market.
Bear phase: During this phase, it’s best to short tokens that you believe are overpriced.
Distribution phase: During this phase, you’ll want to create a well-thought-out strategy to buy and sell during the right windows of opportunity as we discussed earlier in this post.
Accumulation phase: During this phase, it’s best to buy and hold your coins. You may see some slight price fluctuations, but overall the trend will be positive as investors accumulate coins.

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Disclaimer: Please note that the content of this article is for informational purposes only. It should not be construed by anyone as legal, tax, investment, financial, or any other type of advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments.