The Emotional Cycle

There’s a well-documented emotional cycle that investors experience with any volatile asset. It goes roughly like this:

Optimism → Excitement → Thrill → Euphoria (peak) → Anxiety → Denial → Fear → Desperation → Panic → Capitulation (bottom) → Despondency → Depression → Hope → Relief → Optimism.

Most assets run this cycle over years. A real estate bubble might take a decade to complete a cycle. A stock market cycle might take three to five years.

Bitcoin runs this cycle in roughly four years. The emotional highs are more extreme. The emotional lows are more extreme. Every stage is compressed and amplified.

This creates a specific challenge: people experience emotions they’re not equipped for, on a timeline faster than they can adapt. Someone who discovered Bitcoin in early 2021 went from optimism to euphoria in months, then crashed through panic and desperation in 2022, in less than two years.

That’s not enough time to develop the psychological infrastructure to handle it well.

The people who navigate Bitcoin’s emotional cycle most successfully tend to be those who’ve experienced at least one full cycle. Not because they become immune to the emotions — they don’t — but because they’ve seen that the emotions lied before. The desperation didn’t mean it was actually over. The euphoria didn’t mean it would go up forever.

For people in their first cycle: the emotions are real, normal, and not necessarily useful guides to action. That’s the main thing to know.

Tomorrow: why checking the price every day is making things harder.

— The Daily Bit