Cycle Psychology: Recognizing Where We Are

What you'll learn

• The Oldest Story in Finance
• Charles Mackay and the Madness of Crowds
• Hyman Minsky and the Five Stages of a Bubble
• The Four-Year Bitcoin Cycle Hypothesis
• Cycle Indicators: What Actually Helps
• Behavioral Signals: What People Around You Tell You
• On Elliott Waves and Other Pattern Theories
• Where We Are in May 2026
• For Deeper Reading

Key terms

Four-year Bitcoin cycle

The empirical observation that Bitcoin price has tended to peak roughly 12-18 months after each halving (Nov 2012, Jul 2016, May 2020, Apr 2024) and bottom roughly 12-18 months before the next; based on a small sample of four cycles.

Bitcoin halving

The hardcoded event every 210,000 blocks (approximately 4 years) that cuts the per-block mining reward in half. Halvings have occurred on Nov 28, 2012; Jul 9, 2016; May 11, 2020; and Apr 19-20, 2024. Next expected around March 2028.

Financial Instability Hypothesis

Hyman Minsky's thesis that long periods of stability encourage risk-taking which makes the financial system fragile. Articulated in his 1992 Levy Working Paper No. 74. The five stages: displacement, boom, euphoria, profit-taking, panic.

Minsky moment

The inflection point at which seemingly stable conditions tip into crisis as accumulated leverage and risk-taking force a deleveraging cascade. The term was popularized after the 2007-2008 financial crisis.

MVRV Z-Score

A Bitcoin on-chain indicator developed by Murad Mahmudov and David Puell that compares market value to realized value, normalized as a Z-score. Readings above 7 have historically marked cycle tops; readings below 0 have marked cycle bottoms.

Pi Cycle Top Indicator

A Bitcoin cycle indicator that tracks the 111-day moving average crossing above the 350-day moving average doubled. Has historically marked cycle tops within roughly three days in 2013, 2017, and 2021.

NUPL (Net Unrealized Profit/Loss)

A Bitcoin on-chain metric measuring aggregate profit or loss across all holders. NUPL above 0.75 has historically signaled euphoria zones near tops; NUPL below 0 (capitulation) has signaled bottom zones.

Fear and Greed Index

A 0-100 sentiment index created by Alternative.me in 2018 that aggregates volatility, momentum, social media activity, surveys, dominance, and search trends. Below 25 is "extreme fear"; above 75 is "extreme greed."

Stock-to-Flow model

A 2019 Bitcoin price model by pseudonymous analyst PlanB based on the ratio of existing supply to new issuance. The model predicted approximately $100,000 by Dec 2021; Bitcoin fell to $17,600 by June 2022, invalidating the model by most statistical standards.

Wyckoff method

A market-cycle framework developed by Richard Wyckoff in the early twentieth century dividing cycles into four phases: accumulation (smart money buys at lows), markup (steady uptrend), distribution (smart money sells to retail near highs), and markdown (downtrend).

Bitcoin dominance

Bitcoin's share of total cryptocurrency market capitalization. Falls during late stages of bull markets as capital rotates to altcoins ("alt season") and rises during bear markets as capital flees back to Bitcoin.

This time is different

The phrase that, per Carmen Reinhart and Kenneth Rogoff's 2009 book of the same name, has preceded essentially every major financial crisis since the medieval period—a strong contrarian signal that fundamentals are being ignored.