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These phases essentially create a cyclical pattern, leading to perpetual movement through expansion, peak, contraction, and trough.
Historical Consistency
The remarkable consistency of the business cycle is crucial. The ISM Purchasing Managers Index (PMI) is one effective tool for visualizing this cycle. A significant threshold in this model is the line at 50, separating periods of economic growth above this line from contraction below it.
Historically, important crypto bull runs correspond to expansion phases. For example, the bull runs of 2013, 2017, and 2021 occurred at points of economic growth, while downturns in crypto markets mirrored contraction phases. The cyclical nature of this index showcases its predictive capabilities regarding market behavior.