Blockchain and Cryptocurrency Advanced - How Market Psychology Can Be Measured Using a Crypto Chart

When it comes to measuring market psychology, it can be done by understanding the different phases in the market which are the accumulation phase, uptrend phase, distribution phase and downtrend phase. All the phases in the market proves the idea of the different trading psychology that make up the market psychology. I will be using the AAVE/USDT to demonstrate the various phases in the market

AAVE/USDT pair

Accumulation

In the accumulation phase, the large investors starts buying the coin strategically to accumulate a large portion before the smaller investors enter the market. The large investors are buying is carefully so as not to cause the price to increase drastically. On the chart, we can see the phase is associated with a sideways or horizontal movement.

Uptrend

As the large investors are buying, some other smaller investors who are sharp and caught the phase early begin to buy as well. The joint forces of the large investors and other smaller investors who caught the phase early begin to push the price of the coin upwards. The buying pressure suppresses the selling pressure and begins to cause the price to increase, this will alert other traders and investors to buy so as not to miss out. “Fear of missing out” sets in, the price continues to move in an uptrend.

Distribution

At this point, the large investors and other smaller investors who caught the market early are in serious profit. At this point, the large investors and the smaller investors who bought early are satisfied with the profits made and begin to carefully sell and take profit. As the large investors and some other smaller investors are selling, the price is slowly falling but not significant enough to cause panic.

Downtrend

As the selling pressure increases, the selling pressure begins to slowly suppress the buying force. The price of the coin begins to fall at a much faster rate. This will alert other traders and investors who bought at a higher price. Panic will set in, FUD in the market and people who bought high will begin to sell as a result of fear of losing all their investment. The selling pressure continues to increase until it suppresses the buying force. The market enters a downtrend phase where the price continues to fall at a faster rate like we can see on the chart.