What “market cycles” mean in crypto
Crypto cycles are multi-month to multi-year swings between rising prices and liquidity (bull markets) and sharp drawdowns with risk aversion (bear markets). Correlation research shows that since 2020, major coins have moved more in sync with equities—so global risk cycles and liquidity conditions increasingly shape crypto’s ups and downs.
2024–2025 catalysts to know
- Spot Bitcoin ETFs (U.S.) began trading on January 10, 2024, broadening mainstream access. Spot Ether ETFs followed in July 2024. These products can influence flows and cycle dynamics by making allocation easier for traditional investors.
- Bitcoin’s fourth halving occurred at block 840,000 in April 2024—reducing new issuance and coinciding with unusually high transaction fees around the event. Halvings are watched by investors as cycle landmarks, even if outcomes aren’t guaranteed.
- Ethereum’s March 13, 2024 Dencun upgrade (EIP-4844) introduced “blob” data that helps lower Layer-2 costs, improving user economics during expansions.
The bull-market playbook
- Set profit-taking rules up front
Decide where you trim (for example, laddered targets or %-based sells) so euphoria doesn’t drive decisions. - Rebalance on a cadence or threshold
Rebalancing keeps risk from drifting as winners run. Research commonly supports simple annual rebalancing or threshold bands (e.g., 5–10%) to balance tracking error and costs. - Respect leverage
Leverage magnifies drawdowns when momentum snaps. U.S. regulators repeatedly warn that crypto-linked products and platforms can be exceptionally volatile and that losses may be rapid—especially with margin or futures. - Beware narrative chasing
Use written theses and position-size caps for small, speculative assets; revisit after upgrades, regulatory changes, or liquidity shifts.
The bear-market playbook
- Dollar-cost averaging (DCA) to stay engaged
DCA can help investors keep contributing through volatility and avoid poor timing—though classic studies find lump-sum investing usually wins on average. Choose process over prediction. - Expect deep drawdowns
Since 2014, bitcoin has experienced multiple >50% drawdowns; the three largest averaged ~80%. Design allocations and cash buffers that survive those magnitudes. - Rebalance and harvest opportunities prudently
Use cash flows to rebalance toward targets; avoid forced selling. (Costs and taxes matter—see next section.) - Tighten operational risk
Review custody, 2FA, and counterparty exposure; avoid over-concentration on any single venue.
Timing vs. process: DCA or lump sum?
Evidence across global markets shows lump-sum investing has historically outperformed DCA roughly two-thirds of the time because it maximizes time in the market. But DCA remains a valid behavioral tool for risk-averse investors who might otherwise sit in cash or capitulate during sell-offs. Pick the approach that you can stick with through full cycles.
Rebalancing that works in real portfolios
Keep it simple:
- Calendar method: evaluate yearly.
- Threshold method: trade only when any sleeve drifts ~5–10% from target.
Recent research and industry guidance suggest annual or threshold-based approaches can control risk without over-trading; choose one rule and keep it consistent.
Taxes & records (U.S. snapshot—check local rules)
In the U.S., digital assets are taxed as property. Selling, swapping, or receiving crypto as payment is typically taxable and must be reported. Starting with transactions on or after January 1, 2025, brokers are required to report certain digital-asset sales on the new Form 1099-DA, increasing visibility for taxpayers and the IRS. Keep detailed records of basis, dates, and proceeds.
Risk signals to watch each quarter
- Macro: liquidity, real yields, and equity risk appetite (crypto-equity correlation has been elevated since 2020).
- Crypto-native: issuance changes (e.g., Bitcoin halving), network upgrades (e.g., EIP-4844), ETF flows, and venue health (fees, spreads, outages).
- Volatility regime: prolonged periods of >50% drawdowns aren’t rare—size positions accordingly.
FAQs
Do halvings always cause bull markets?
No guarantee. Halvings reduce issuance but price depends on many factors, including demand, macro conditions, and market structure. Treat halvings as a potential catalyst, not a certainty.
Are ETFs changing the cycle?
ETFs lower frictions for traditional allocators and can influence flows during risk-on phases; both bitcoin (Jan 2024) and ether (July 2024) now have U.S. spot ETFs.
Did Ethereum’s Dencun upgrade matter to cycles?
By reducing L2 data costs with EIP-4844, Dencun improved user economics for rollups, potentially reinforcing activity during expansions.
How much could a bear market hurt?
Bitcoin has seen multiple >50% drawdowns; the largest have averaged roughly 80%, which is why allocation sizing, cash buffers, and rebalancing rules are essential.
Is leverage smart in bull markets?
Leverage can compound gains but also accelerates losses when momentum reverses. Regulators explicitly warn about volatility and the risks of margined/futures products.
Bottom line
Cycles will keep turning. Build a plan you can execute in both regimes: simple allocation, annual or threshold rebalancing, a disciplined entry plan (DCA or lump sum), and rigorous risk controls around custody and leverage. Use catalysts like halvings, ETF access, and major upgrades to review your plan—not to abandon it.
