Author: Coingecko
Translation: Felix, PANews
The cryptocurrency market seems to be entering an active growth phase. Bitcoin's price rise has driven the entire cryptocurrency market upward. But every investor will ask one question: when will the bull market end, and when should they take profits? Perhaps the market cycle and liquidity levels can provide answers.
Market cycles are a recurring phenomenon in finance, and cryptocurrencies are no exception. These cycles reflect changes in liquidity between different asset types and investor behavior over time.
Stages of the Cryptocurrency Bull Market Cycle
Phase 1: Fiat Currency → Bitcoin
Each bull market cycle typically begins with new funds flowing into the cryptocurrency market via Bitcoin. Institutional investors, hedge funds, and cautious retail investors view Bitcoin as the safest and most reliable way to enter the crypto space.
Bitcoin is the most recognized and liquid crypto asset, making it the preferred asset for newcomers or large funds. This influx of funds drives up Bitcoin's price, setting the tone for the entire market.
Phase 2: Bitcoin → Large Altcoins
Once Bitcoin enters a bull market, investors (including large hedge funds and companies) will turn to large altcoins like ETH, SOL, and BNB in pursuit of higher profits. Bitcoin's dominance begins to decline, marking the start of a comprehensive altcoin season.
For example, during the bull market in 2021, when Bitcoin peaked in March, the total market cap of altcoins grew by 95% two months later, peaking in May 2021.
Phase 3: Large Altcoins → Mid-Cap and Popular Speculative Tokens
As confidence and enthusiasm grow, investors' attention shifts towards smaller, less liquid tokens that are perceived to have high potential. Investors speculate on mid-cap projects, hoping for returns of 10x or even 100x. Market volatility intensifies, and greed and FOMO psychology emerge. While some coins yield massive profits, others quickly vanish.
Phase 4: Final Phase — meme coins
When rationality gives way to frenzy, meme coins like DOGE, SHIB, and PEPE become the new darlings of the market. Meme coins lack fundamentals, and their prices are entirely driven by emotions, celebrity endorsements, and social media hype. The surge in meme coin activity often signals the peak of euphoria, indicating that the cycle has reached its zenith, and the risks in the cryptocurrency market have become too high.
Based on historical data from the previous cycle, the peak of meme coins marks the decline of the entire cryptocurrency market. In October 2021, the total market cap of meme coins began to decline, and Bitcoin reached its last peak in early November before starting to fall.
Why meme coins signify the end of a bull market cycle
Meme coins mark the final stage of the cryptocurrency bull market, as they reflect the transition from rational investing to frenzy. At this point, any fundamental factors give way to emotions (primarily greed). Meme tokens, which usually have almost no practical value, start to dominate trading volume simply because they are popular on social media or supported by the community.
Historically, this pattern has repeated during every major uptrend. In 2017, it was those low-quality initial coin offerings (ICOs) without products. In the second half of 2021, SHIB soared 1200% during the second wave of cryptocurrency rallies and began to decline at the end of October. There was a two-week gap before Bitcoin started to decline in early November, making this a good warning for all investors.
Every time a new crypto boom arises, it is accompanied by excessive participation from retail investors, a sharp decline in Bitcoin's dominance, ultimately leading to a market-wide price crash. In previous crypto booms, meme coins attracted the latest wave of liquidity, often coming from inexperienced investors seeking quick profits, indicating that the market has overheated.
But should we still pay attention to meme coins now?
What is the current market condition?
From the perspective of the total cryptocurrency market cap, a breakout of the cup-and-handle pattern can be expected, followed by a successful breakout of the head-and-shoulders pattern. Both are bullish patterns, targeting a level of $4.15 trillion. This indicates about 15% potential growth for the cryptocurrency market. The situation for altcoins (total market cap 2, excluding Bitcoin) is similar. A price breakout of the cup-and-handle pattern targets a market cap of $1.8 trillion, potentially allowing for 37% growth.
But what about the market cap of meme coins? It can be seen that adjustments and growth cycles occur every four years. Prices may retrace over 80%, followed by increases of thousands of percentage points. Currently, the market cap is emerging from an adjustment phase, so further growth can be anticipated until it reaches $1 trillion, nearing the edge of a frenzy cycle. This is a good sign for the existing cryptocurrency market and a good time to lock in profits.
But this time, meme coins may not lead the hype. They defined the peak of the previous bull market, but history does not always repeat itself. In this cycle, we may see a new narrative rise: real-world assets (RWA). Moreover, there are reports that this could be a significant narrative that brings about a new round of frenzy.
Check out these news:
Robinhood will launch tokenized stock trading in Europe.
Kraken has launched tokenized stock trading in the United States.
Investment platform Republic will offer tokens representing private equity in companies like SpaceX.
Reports say that Coinbase is seeking approval from the U.S. SEC to offer tokenized securities.
And that's not all.
From a technical perspective, the total market cap of RWA previously retraced by 86% and then surged by 4500%. The current retracement has reached -93%, and prices are breaking through this phase, indicating a potential increase of 300%, reaching a market cap of $1 trillion. If meme coins were the speculative climax of the previous cycle, then RWA may be the profit-taking signal of this cycle.
Conclusion
Cryptocurrency trends show cyclical changes that largely depend on the flow of funds from large-cap projects to small-cap projects. While it is impossible to accurately predict tops and bottoms, understanding the structure of bull market cycles based on human psychology will help you find the best entry and exit points in the cryptocurrency market. Focus on the flow of funds, identify trends and signs of frenzy, and always have a solid profit-taking plan.
(The above content is excerpted and reprinted with permission from partner PANews, original link)
"Overview of Cryptocurrency Market Cycles: When Will This Bull Market End?" This article was first published on (Block客).
