Bull-Bear Cycle Psychology: Why Retail Buys Tops and Sells Bottoms

Behind every price chart is human nature. Understanding the sentiment cycle helps you be less greedy at the most expensive times and less fearful at the cheapest.

The four phases of the sentiment cycle

1. Doubt/despair (historically depressed sentiment): after a long decline, participation and media sentiment can weaken. This may be useful context for a plan, but it does not identify a reliable bottom or entry time.
2. Hope/optimism (early uptrend): price quietly recovers, early participants profit, mood warms.
3. Excitement/euphoria (top): everyone's making money, newcomers flood in, even taxi drivers talk coins. Highest risk, yet FOMO drives frantic buying.
4. Anxiety/panic (early downtrend): price tops and falls, "just a dip" self-reassurance, until panic selling.

Why retail always does the opposite

• Buying tops: when media is hottest and the wealth effect strongest, FOMO overrides reason.
• Selling bottoms: after continuous declines and shattered hope, panic and the urge to "cut the pain" beat patience.

This is the psychological root of "chase up, dump down."

How to use it, not be used by it

1. Use the Fear & Greed Index as a contrarian reference: be wary at extreme greed, attentive at extreme fear (but not mechanically bottom-fishing).
2. Preset a plan: set buy/sell discipline when calm, to avoid being hijacked by present emotion.
3. Watch your surroundings: when people who understand nothing talk coins and guarantee profits, you're often near a top.

The core You can't eliminate emotion, but you can recognize it. The market is a machine that transfers money from the impatient to the patient.

For reference only. Not financial advice.

See also Fear & Greed Index, Bull & Bear Cycles: The Four Phases and the Sentiment Map, Five Iron Rules of Risk Management: Survive to Win