You were so determined. It was your master plan. Probably, the first and most important lesson you learned when you began exploring financial markets: Buy when there’s blood in the streets – a phrase almost every investor knows. And yet, hardly anyone truly adheres to it.
Every investor starts with big dreams and the plan to buy at the next bottom. But then fear and greed kick in. They cloud our judgment, and we part ways with our brilliant master plan. We lose track, and we lose our minds – just because everyone around us suddenly claims the world is ending. Or because our portfolio is so deeply in the red that fear of even greater losses paralyzes us. And indeed, it’s easier said than done to buy the bottom.
You can only know it was the bottom after the next rally is underway – by then, it’s too late. With every major sell-off, we find ourselves torn: Should I get in now, or could I be trying to catch a falling knife? Is the bottom near, or will it keep going lower? Is the cycle over, and am I buying into the next bear market? These questions are especially tormenting right now with Bitcoin and Altcoins.
This sentiment is a bullish sign – but not the only one. There are three important reasons to be bullish on crypto right now.
Reason 1: Fear Has Finally Arrived
The tone among the crypto community has become harsher, which has been noticeable for some weeks now. Just in early summer, social media posts were regularly filled with very determined bullish stances on the market. Warnings of a looming recession were dismissed as fearmongering, and positive news was celebrated. The market was confident: soon, prices would bounce back. And what happened? They went down. Of course. Bitcoin isn’t malicious; that’s just how financial markets work – especially young asset classes that are largely unregulated and thus the playground of big investors.
When the market gets too greedy, it pulls back. And if investors remain overly confident, it drops even more. This development continues until sentiment shifts. That’s exactly what we’re seeing on social media right now: people are scared. And those who are scared quickly become aggressive. The former determination is forgotten, and the master plan is thrown out the window. Confidence has given way to paralyzing fear, and frustration over red portfolios manifests as blame. There must be someone at fault.
It’s scientifically proven that people like to credit themselves for positive achievements – even if others helped them along the way. But when mistakes are made, we look for others to blame – even when we’re fully responsible. This also happens in financial markets. When markets rise, anyone who bought earlier feels like a genius. When markets fall, those same people feel like fools – or blame others for advising them to buy at the wrong time. There’s no middle ground.
Extreme volatility arises from extreme emotion. Anyone who wants to experience parabolic rises in a bull market must also endure the downward spirals. No one buys exactly at the bottom, and no one sells exactly at the top. But if we blame others for our mistakes, we can’t learn from them. Instead, we project our frustration, rather than constructively analyzing what went wrong. When we blame others, it limits our sense of agency over our own fate. And this prevents us from making changes. It paralyzes us. This is why bottoming phases in markets are so slow and painful.
Reason 2: Nobody in Politics Wants a Crash
It’s hardly unconventional that the current correction is taking so long – and that makes it all the more painful. The silver lining: the longer the consolidation lasts, the more pessimistic the market becomes – and the greater the fear, the closer we are to the bottom and the next trend reversal. One might argue that the Fear and Greed Index, which hit a new low recently, can’t be used on its own to predict market phases.
After all, it doesn’t account for macroeconomic indicators and could keep dropping if we truly enter a recession. And that’s true. No one can predict when the next recession will hit. It’s almost certain that it will happen eventually, as downturns are part of a normal economic cycle and are essential for sustainable growth. However, there are some signs that the current panic may be premature. One of the most important reasons is the strong interest of political actors in keeping the financial market on a constructive track for now.
The US presidential election is just around the corner, with the campaign now entering its final phase. Donald Trump is running for the Republican Party, portraying himself as a pro-crypto and Bitcoin-friendly candidate. For the Democrats, current Vice President Kamala Harris is replacing Joe Biden.
Harris, known for supporting cannabis legalization, is also seen as being open to new markets, recently engaging with crypto entities like Ripple, Circle (a stablecoin issuer), and Coinbase (NASDAQ:COIN) to improve her party’s relationship with the crypto market. Regardless of the candidates’ positions, history shows that US presidential elections have almost guaranteed rising markets in Q4, though the third quarter tends to be less bullish – a pattern we’re witnessing again right now. Think of the market panic on August 5, for example.
Reason 3: Bitcoin Enters Its Strongest Season
Bitcoin’s weakness in August and September is nothing out of the ordinary. Even in past bull markets, significant corrections often occurred in Q3. The crypto market has seen extended summer lulls with persistent altcoin crashes before. Since 2013, September has been red for Bitcoin in eight out of eleven years. August saw the same trend eight times. On average, September delivered a five percent loss, while August was just barely positive at two percent – and only because of extreme outliers of +30 percent and +65 percent during the 2013 and 2017 bull markets.
During the 2021 bull run, August saw a more modest 13 percent gain, and in years before major rallies, this month often underperformed. September fared even worse: no bull market year has seen a positive September. October, on the other hand, jokingly referred to as “Uptober” in the crypto space, is a different story. In nine out of eleven years since 2013, October has been very bullish, with only the bear markets of 2014 and 2018 as exceptions.
November looks similar, being positive in eight out of eleven years, with an average return of a whopping 46.81 percent, even outshining October’s strong average of 22.9 percent. These two months are historically Bitcoin’s strongest by far. So far, this year’s performance fits this pattern remarkably well: a strong spring, a weak summer – and now, a bullish fourth quarter?
No one has a crystal ball. However, the three aspects discussed in this article point to a strong recovery for the crypto market during the fall and winter. Historically speaking, bullish Bitcoin predictions do align with the current market conditions – even though it doesn’t look like a bull run right now. But this dire mood is exactly what the broad market seems to need before the next rally can flourish. It’s been the case in past cycles. And as the saying goes, the five most expensive words in investing are: This time will be different.