Market reversals aren’t technical events. They’re psychological collapses.
When an uptrend ends, it’s not because price hit a resistance line. It’s because everyone believed the trend would continue forever, and then reality broke that belief.
The hardest part: That belief dies slowly. Over months. Sometimes years.
The Nature of Market Reversals
When Bitcoin goes from $69K to $30K, that’s not just a price move. It’s the breakdown of a story people believed.
The story was: “Bitcoin will keep going up. Institutions are in. This time is different.”
After the crash: “It’s a correction. We’ll get back to ATH soon.”
Years later, with Bitcoin nowhere near $69K: “Maybe I was wrong?”
That psychological journey takes time. And that’s where you can actually make money—by understanding where in that psychological journey we are.
John Bollinger observed that market tops often print as three pushes to a high. Why three?
- Push 1: Believers add. “This is the move!”
- Push 2: Skeptics finally capitulate. “Okay, I’m getting in.”
- Push 3: Desperate FOMO. “This can’t stop! I’m maxing credit cards!”
Then price falls and everyone realizes: There were no buyers above. Just sellers waiting for this moment.
The Reverse Is True at Bottoms
Bottoms are harder to spot, but the psychology is inverse:
- Push 1: Capitulation. “It’s done. We’re going to zero.”
- Push 2: More selling. “I was wrong holding. Let me sell at any price.”
- Push 3: Panic selling of last holdings. “Just get me out before it’s worthless.”
At push 3, smart money starts buying. But they’re quiet about it.
The masses only realize it was a bottom in hindsight.
The Power of False Expectations
Let me illustrate this with a historical example (it applies to crypto identically):
During Germany’s 1923 hyperinflation, prices kept rising but people expected them to fall back to pre-WWI levels. Why?
Phase 1 (Deflationary Expectations):
- Government inflates the money supply by 3x
- But prices don’t rise 3x—maybe 30% or 50%
- Why? Citizens expected things to return to normal
- They held cash, which kept the money supply from causing as much inflation
Phase 2 (Inflationary Expectations Emerge):
- Years pass. Prices keep rising despite expectations
- People realize: “It’s not going back to 1914 levels”
- Psychology shifts. Now people expect prices to keep rising
- They spend faster to beat the rise
- Money supply effects intensify—inflation accelerates
The inflection point wasn’t a number. It was when public psychology shifted.
Applying This to Crypto
We just lived through this in 2022-2025:
Pre-2022: Everyone believed Bitcoin would go to $100K, $500K, eventually $1M. Institutions were “accumulating.” This time was different.
2022: Reality hit. Rates rose. A few blowups. But most people still believed: “It’s a correction. We’ll be back at ATH soon.”
2023-2024: Years pass. Bitcoin’s not hitting new ATHs. DeFi is a ghost town. Expectations slowly shift. “Maybe Bitcoin is just a volatile asset, not a new financial system.”
2025: Now the thesis is different. Bitcoin is “digital gold,” not a monetary revolution. This is a completely different belief system, and it took years to die.
The traders who made money weren’t the ones who perfectly caught the 2021 top. They were the ones who recognized the shift in psychology and positioned accordingly.
Why This Matters for Your Trading
Tops are easy to miss because people will defend them for years.
As Bitcoin was falling from $69K, you had endless commentary: “This is healthy. Institutions are accumulating. We’ll have a 50% correction and then moon.”
That’s not analysis. That’s defending your belief system.
Smart money wasn’t defending. They were taking profits and moving on.
Bottoms are hard to time because the market feels like it could go to zero.
When Bitcoin was at $16K (2022), the narrative was: “It’s a scam. Regulation will kill it. We’re going to $5K.”
Buying at $16K felt stupid. The pain hadn’t stopped.
But that’s when smart money was actually accumulating.
Reading the Shift
How do you know when psychology is actually shifting, not just taking a breather?
Watch what people actually do, not what they say:
- Accumulation phase: Smart money is buying, volume is high on dips, rallies are weak. Retail is selling.
- Distribution phase: Smart money is selling, volume is high on rallies, dips don’t get bought. Retail is buying.
- Transition phase: Longs are opening at tops (FOMO), shorts are opening at bottoms (capitulation). Extremes create reversals.
You can measure this with funding rates, open interest on perpetuals, and stablecoin flows.
When funding rates are at 0.15%+ daily, longs are overleveraged. One push lower liquidates them. Top is near.
When funding rates are negative and open interest is collapsing, shorts are capitulated. One push higher and the panic rally is on.
The Hardest Part
The hardest part of trading reversals isn’t identifying them. It’s waiting.
You know distribution is happening, but Bitcoin still goes up for 3 more months. Do you short now? Or wait?
You know accumulation is forming, but Bitcoin drops another 40%. Do you buy now? Or wait?
Most traders can’t handle this. They enter too early and get shaken out.
The professionals? They wait for confirmation. They don’t fight the trend until the trend has already started turning.
Reversals and You
If you understand that reversals are psychological before they’re technical, you’ll have patience.
Bottoms aren’t one-day events. They’re 2-4 month processes where institutions slowly buy and price does nothing impressive.
Tops aren’t one-day events. They’re 3-4 month processes where retail FOMOs and smart money slowly exits.
Your edge is in recognizing which psychological phase the market is in, and positioning accordingly before everyone else figures it out.
That’s when you make money. Not at the exact turn (that’s luck), but in the lead-up to the turn.
Stop staring at charts looking for the perfect reversal candle. Start reading the market psychology.
The reversal is already happening. You’re just waiting for the crowd to realize it.