Bitcoin Mimics Textbook Market Sentiment Cycle, What Happens When Confidence Returns?

Tony "The Bull" Severino

Last Updated: June 11, 2024 2:19 pm

3 mins read

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Markets are cyclical and go through alternating periods of positive and negative sentiment, with price action following the tone across the market. Although these changes appear to be difficult to predict, Bitcoin price is currently following a textbook market sentiment cycle chart from the book The Nature of Risk.

If what follows in the book continues across the cryptocurrency market, a major trend change is due. Take a closer look at the market sentiment cycle chart by Justin Mamis.

Is Bitcoin Following A Textbook Market Sentiment Cycle?

Markets tend to move in the same way. This is why certain technical analysis chart patterns can yield accurate results with an increased probability.

When zoomed out, even market cycles tend to advance in the same five-wave structure, according to Elliott Wave Theory. Those who dive deepest into technical analysis become convinced of its power to not only predict market behavior, but human behavior as well.

Ralph Nelson Elliott who came up with the theory also wrote a book on the secret of the universe he referred to as “nature’s law.”

Another author with plenty of stock market experience, Justin Mamis, also recognized these ties and penned the book The Nature of Risk: Stock Market Survival & the Meaning of Life. The market sentiment cycle chart below can be found within its pages.

Bitcoin versus Justin Mamis' market sentiment cycle chart | Source: BTCUSD on TradingView.com

All About Justin Mamis And Market Sentiment Cycles

Juxtaposed next to the Bitcoin line chart, is the same chart presented by Justin Mamis that highlights the many phases and emotions felt during a market sentiment cycle.

At the height of enthusiasm, buying the dip failing to be effective was a sign a trend change was due. Below the highest support lines breaking down caused the market to enter a stage of disbelief. Disbelief turns into panic, and as the asset bottoms out, the market becomes discouraged at the lack of movement.

At aversion, investors even feel a strong sense of dislike toward the asset and might even want to see new lows as a result. It is at this point when confidence begins to return and bearish traders are left in denial.

Justin Mamis is the former Assistant Director of the NYSE Floor Department, former Senior Vice President and Chief Market Technician at Hancock, and appeared frequently in Barron’s and The Wall Street Journal. In his own words, Mamis said in a newsletter:

A cycle begins with stocks climbing “a wall of worry,” and ends when there is no worry anymore. Even after the rise tops out, investors continue to believe that they should buy the dips…Unwillingness to believe in that change marks the first phase down: “It’s just another buying opportunity.” The second, realistic, phase down is the passage from bullish to bearish sentiment…Selling begins to make sense. It culminates with the third phase: investors, in disgust,…dump right near the eventual low in the conviction that the bad news is never going to stop…

Don’t believe the chart represents what could happen in Bitcoin? Well, then do the conditions in sentiment follow what Mamis told investors?

Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market insights and technical analysis education. Please note: Content is educational and should not be considered investment advice.

Featured image from iStockPhoto, Charts from TradingView.com

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

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In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

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Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
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Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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