Where are we in the market and economic cycle? -

The economy moves in predictable cycles with ups and downs as investors try to anticipate the next cycle months in advance. So they move their money into the industries that tend to perform best in the next cycle, creating “Sector rotation ” or the movement of money invested from one industry to another. For example, During “Market Bottom”, medical, health, and consumer products are where money rotated to as its basic human needs. Or, During Bull Market, investors start looking into forward-looking sectors like Technology.

The Market Cycle

They move ahead of the economic cycle 3-9 months since investors make decisions in anticipation of the future.

Market bottom: A poor economic backdrop brings the whole market lower. Investors prepare to rotate into more economically sensitive sectors.

Bull market: The market bottom has passed. The economic activity starts to rise.

Market top: Economic growth overheats, and interest rates rise.

Bear market: Markets begin to drift from highs.

The Economic Cycle
They can provide solid confirmation of prevailing market trends as investors price in their estimates beforehand.

Full Recession

Falling GDP
Pessimistic Consumer Sentiment
Falling Interest Rates
Normal Yield Curve

Early Recovery

Rebounding GDP
Optimistic Consumer Sentiment
Low but Stable Interest Rates
Steepening Yield Curve

Late Recovery

Tapering GDP
Strong Consumer Sentiment
Growing Inflation
Spiking Interest Rates
Flattening Yield Curve

Early Recession

Declining GDP
Weakening Consumer Sentiment
High Inflation
Flat/Inverted Yield Curve

🪙What about the crypto market?

There isn’t a clear analogy in the crypto market since most cryptocurrencies fall within one broad industry like Technology, and most projects fall within a few sectors, e.g., finance, investment, gaming, etc.

📝How can I benefit from this?
To apply the market and the economic cycle with cryptocurrency, you can still target investments based on risk appetite that varies with cycles. For example, when people invest in riskier products again, the least risky ones like BTC and ETH would likely benefit first.

Finally, past performance isn’t always indicative of future results. Therefore, it is best for you to #DYOR or “do your own research” to sharpen your investment decision-making and always look for the brighter side!

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