Dip, mid-cycle crash, or end of cycle crash?

Hey everyone,

Some people are long term investors in crypto.  They buy quality assets and hold for the long term.  This is a winning strategy, and we use it for part of our portfolio.

Other investors seek a bit more excitement and try to trade the cycle. We do this too, but it’s not easy. To trade the cycle once it starts, we need to do a good job evaluating one question:

When Bitcoin drops, which of these is occurring:

• Dip

• Mid cycle crash

• End of cycle crash

This is evaluated for Bitcoin because it is the central asset for the crypto asset class. Below is an image of the last cycle pointing out the dips, mid cycle crash, and end of cycle crash.

Here is some information that will help you identify which one is occurring.

Dips

• Dips are shorter term pull backs in longer up trends that typically last a few weeks

• In past cycles they have been 15-30% corrections

• How to identify: 

  • Price has no issue setting a new high when going back up

  • Liquidity cycle will still be heading up

  • Cycle top indicators will not be triggered

• How we deal with them: Hold crypto through them and consider buying the dip

Here is a zoomed in image of a dip.  Notice how it has no issues setting a new high:

Mid cycle crash

• Mid cycle crashes are larger longer crashes that occur in an uptrend. Despite the larger crash, the market recovers and ultimately sets a new high.  They can last months and have 50% drops

• How to identify: 

  • Price has an issue setting a new high

  • Often times, the liquidity cycle will be headed down

  • Some crypto top metrics may be triggered

• How we deal with them: Take each day as it comes. Differentiating between mid cycle crashes and end of cycle crashes can be difficult. If there are profits available, we sell. If it seems like the cycle might trend upward again later, we'll reinvest.

Here is a zoomed in image of a mid cycle crash:

End of cycle crash

• This is the large crash that occurs at the end of a cycle

• Prices don’t recover to the same levels for several years

• How to identify: 

  • Price fails to hit a new high

  • Liquidity will be headed lower

  • Cycle top metrics will be triggered

• How we deal with them: If you’re a long term investor, ride it out.  Odds are good you’ll have some chance to buy more a lot lower.  If you’re trying to trade the cycle - sell!

Here is a zoomed in image of a end of cycle crash:

This is a quality playbook on how you can trade the crypto cycle.  Good luck!

Don’t have time to learn this process?  Our premium newsletter executes this process weekly for you.  It includes:

• Weekly review of the process above

• When we buy or sell crypto

• What our crypto portfolio looks like

If interested, click here to upgrade to premium.

Cheers,

Justin

Important news and interesting content this week

• An overview of developed world economies and how crypto relates - Raoul Pal

• Beyond Volatility: Dan Morehead’s Vision for a Blockchain-Powered World - Wealthion

• Gold investors not switching to Bitcoin - CoinDesk

If you have any thoughts or feedback - feel free to respond to this email.

Visit our website to see all prior articles:

theblockchainbreakthrough.beehiiv.com 

Disclaimer: The Blockchain Breakthrough is not financial advice. Please do your own research.