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22 June 2021

Altcoin Roundup: Market cycle analysis screamed 'take profit’ ahead of May 19 sell-off

Altcoin Roundup: Market cycle analysis screamed 'take profit’ ahead of May 19 sell-off

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The cryptocurrency sector has an established reputation for being volatile and fast-moving, and these characteristics were on full display in May as the rapid decline in the price of Bitcoin (BTC) from $60,000 to $33,000 led to a mass exodus that wiped off $1.2 trillion in value from the total market capitalization.

With that said, now seems like a good time to review the various stages of a market cycle to help get a better understanding of what the market has gone through so far and what can potentially be expected in the months and years ahead.

The four basic phases of a market cycle, which all traders should have a basic understanding of, are the accumulation phase, the mark-up phase, the distribution phase and the mark-down phase.

This phase was seen in the cryptocurrency market beginning around December 2018 when the price of BTC bottomed below $3,500 and extended all the way until October 2020 when its price began to meaningfully rise above $12,000.

The mark-up phase really began to heat up in December 2020 and extended into January 2021 as BTC and the decentralized finance (DeFi) sector were attracting global attention, with the total market capitalization climbing to a high above $2.5 trillion in May as the distribution phase began to initiate.

Similar to the 2017–2018 bull market, the price of BTC reached a new all-time high (ATH) and then began to trend down, which resulted in funds rotating out of Bitcoin and into the altcoin market, further propelling the total market capitalization to a record high of $2.53 trillion on May 12.

As seen in the chart above, the DeFi sector as a whole went through its own market cycle pattern that coincided with its rising popularity and use across the ecosystem.

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