Markets are cyclical and go through alternating periods of positive and negative sentiment, as price action follows a tone across the market. Although these changes are difficult to predict, Bitcoin price He is currently following the market sentiment cycle chart from the book The Nature of Risk.
If the following in the book continues across the cryptocurrency market, a major change in trend is set to occur. Take a closer look at the Market Sentiment Cycle Chart by Justin Mamis.
Is Bitcoin Following the Textbook Market Sentiment Cycle?
Markets tend to move the same way. This is why some technical analysis chart patterns can yield accurate results with increased probability.
When minimizing, even market cycles tend to progress in the same five-wave structure, according to Elliott Wave Theory. Those who delve into technical analysis become convinced of its ability to predict not only market behavior, but also human behavior.
Related reading | Bitcoin’s Weekly Momentum Turns Higher for the First Time in 2022
Ralph Nelson Elliott, who created the theory, also wrote a book on the mystery of the universe which he referred to as “Nature’s Law”.
Another writer with a lot of experience in the stock market, Justin Mamis, also acknowledged these links and wrote the book The Nature of Risk: Stock Market Survival and the Meaning of Life. The market sentiment cycle chart can be found below within its pages.
Bitcoin versus Justin Mamis' market sentiment cycle chart | Source: BTCUSD on TradingView.com
All about Justin Mamis and market sentiment cycles
side by side next to a file Bitcoin The line chart, is the same chart provided by Justin Mamis that highlights many of the phases and emotions I felt during the market sentiment cycle.
At the height of the enthusiasm, the low price buying that failed to be effective was a sign that a change of trend was imminent. The collapse of the support lines below the high caused the market to enter the disbelief stage. Disbelief turns into panic, and as assets go down, the market becomes frustrated due to lack of movement.
In the case of aversion, investors feel a strong sense of hatred for the asset and may want to see new lows as a result. At this point, confidence starts to return and bearish traders are left in denial.
Justin Mames is the former Associate Director of the NYSE Floors Division, former Senior Vice President and Chief Market Officer at Hancock, and has appeared frequently in Barron’s and The Wall Street Journal. According to Mamis He said in a newsletter:
The cycle begins with the stock climbing the “worry wall”, and ends when there is no longer anxiety. Even after the rally reaches the top, investors continue to believe in the necessity of buying the dips… and unwillingness to believe in this change represents the first stage of the decline: “It’s just another buying opportunity.” The second, realistic, gradual reduction is the transition from an uptrend to a downtrend…selling starts to make sense. It culminates with the third stage: the investors, in disgust…
do not believe graph Represents what can happen in Bitcoin? Well, then, does sentiment follow what Mammes told investors?
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Featured image from iStockPhoto, Charts from TradingView.com