In a historical perspective, Bitcoin price explains the investor emotional cycle. The investor emotional cycle stages are in congruence with Bitcoin price as earlier periods of optimism, excitement, thrill and overconfidence leading to euphoria, was observed in 2017 when prices skyrocketed. These stages have been followed by investor emotions of anxiety, denial, anger, fear, despair, panic and capitulation till now. Forward from this low spirit is hope and relief that brings the investor emotions back to the optimism, starting the bull market again. Explaining the current crypto market situation to BlockPublisher, Boss Cole, founder and CEO of Bitcoin investing academy, Boss Crypto said;
We are through the anger and capitulation stage. Engagement in cryptocurrency related groups, forums, etc is down as much as the average altcoin is from it’s ATH [all time high]. Most of the traders I know have switched for Forex or completely given up.
Investor emotional cycle is a series of emotions that represent how they react to the ups and downs of the market. These reactions are inherently human-like in nature and constitute as to what an investor would do next.
Traders giving up the market suggests the state of extreme depression which is the ’emotional bottom’ of this cycle. Investor emotional cycle explains the ’emotional bottom’ but does it also suggests that Bitcoin price has bottomed? Answering the question, Cole said;
We are near the bottom, in psychology and the overall emotional cycle. It does not, however, insinuate that we are at the bottom in price however the odds are in the favor of that bet being correct.
Bitcoin’s price range of $6,000 was a crucial one for a lot of people as they had been waiting for BTC to stabilize at that particular mark. When price broke down to the current $3,000 range, people wanted to get out, representing the stage of capitulation in investor emotional cycle. Explaining that, Cole said;
I believe when we broke from 6k-3k it was the signal that we will complete a full emotional market cycle – which means depression, and basically boredom.
Emotional bottom of crypto market not only flushed out short term gain seekers but also made long term investors uncomfortable. The negative market sentiment is also observed with crypto funds that were launched late last year. They are now heavily invested in Bitcoin and a number of high cap altcoins, while they haven’t produced any considerable gains. This is topped by the continuous distancing of institutional investors from Bitcoin and other cryptos due to persistent problems regarding price volatility and lack of regulation.
Blockchain projects that were rather more established, needed to liquidate their ethers and Bitcoins to fund development. ETCDEV announced in December last year that it would be shutting down operations due to the price crunch. Several coin offerings also took place with billions of dollars raised and hundreds of new tokens becoming a part of the crypto market cap. Bitcoin price has been anything but reminiscent of this investment and it gives realization that the space is over crowded with numerous projects that have less use cases, resulting in reduced value of the token. Commenting about the state of ICOs and blockchain developments in 2019, Cole said;
2019 will see the collapse of a large number of ICO’s who can no longer afford to fund their project, it will see trading volumes dry up, and media coverage slow down even further.
Crypto market has been in a bear cycle since it saw the peak in December 2017 and the investor emotional cycle relates to the bear market. The futures market for Bitcoin provides traders with an instrument to bet against it by shorting it and this also contributes to the bear cycle. But, the technological developments that are being witnessed in blockchain space are tremendous and billions of dollars are being spent to find a ‘killer use case’. Kevin Duffey from Next Level Finance, had wrote to BlockPublisher;
“Thousands of the world’s best engineers and programmers are working on the platform, and billions of investment dollars are fueling major companies and initiatives in the space. In other words, the progress of the platform will continue. As long as that happens, it’s only a matter of time before another spike occurs.”
Progress in technological developments combined with the ’emotional bottom’ of crypto market, makes perfect sense of hope and optimism for a bull run and Bitcoin price might also has found the bottom at the $3,000 range.