1. Price
Generally, during a bull market, the overall market rises more than 2 times, with Bitcoin rising 2-3 times.
When Bitcoin has been in a prolonged sideways trend, and altcoins have risen considerably, it is important to be particularly cautious. At this point, the market has severely exceeded and overdrawn future value, and one must learn to stop appropriately.
2. On-chain transaction volume
During a bull market, on-chain transaction volume usually expands significantly, with funds frequently flowing. However, it is important to note that when prices reach new highs while on-chain transaction volume starts to decline, it is an important signal of a market peak.
For example, in the later stages of the 2021 bull market, although on-chain transaction volume briefly spiked, it subsequently shrank, indicating that market capital inflow willingness was starting to weaken.
3. Leverage and lending data
In the DeFi market, leverage and lending data are important indicators for judging market sentiment.
Surge in lending demand: Investors are borrowing stablecoins to buy mainstream assets in large quantities, indicating a bullish market sentiment.
High liquidation risk: If the liquidation price of most borrowed funds approaches the market price, it indicates that investors are overly optimistic and leverage risk is increasing.
Typically, excessively high leverage can trigger a chain liquidation with even slight market fluctuations, becoming the starting point of a bull market collapse.
4. New wallet count
In the later stages of a bull market, the number of new wallets will significantly increase, and many newcomers will enter the market. It is especially important to be cautious when retail investors create a large number of wallet addresses.
For example, at the peak of the 2021 bull market, MetaMask's active users exceeded 10 million, and the market quickly turned bearish afterward.
5. Regulatory policies
The cryptocurrency market is sensitive to policies, and regulatory developments often determine the market direction.
In 2017, China banned ICOs, and in 2021, it cracked down on mining. These policies directly contributed to the end of the bull market. It is important to observe global policy dynamics, such as the SEC's movements in the U.S. and China's anti-money laundering policies.
6. Institutional capital trends
The inflow and outflow of institutional funds are important indicators of a bull market. For example, the holdings of Grayscale's BTC and the net inflow and outflow of ETF funds. If institutional funds start to reduce their holdings of mainstream assets or shift to other areas, it indicates that the market has entered the late stage of the bull market.
At the end of a market trend, the speed of capital inflow slows down, and it may even shift from inflow to outflow, indicating net selling, which also means that the market is about to end. This is an important reference indicator.
7. Market capitalization and valuation
In a bull market, the market capitalization and valuation of many cryptocurrencies can deviate from their fundamentals.
For example, in 2021, DOGE's market value briefly entered the top five, and some NFT projects were valued at hundreds of millions of dollars. If similar bubble phenomena occur again, it indicates that the market is overheated and may correct at any time.
8. Comparison of total market capitalization and global economy
The cryptocurrency market can also be measured using the 'Buffett Indicator' to assess bubbles. When the total market capitalization of the crypto market exceeds a certain threshold (such as 15%) of global GDP, it indicates that the market valuation is too high.
For instance, in 2021, the total market capitalization briefly exceeded $30 trillion, while global GDP was about $85 trillion, corresponding to approximately 3.5%. This rapid expansion is a risk signal.
9. Media opinion
When mainstream media starts to heavily promote 'there's no top in the bull market' and 'Bitcoin will reach $1 million,' it is time to be cautious. The media hype is usually a reflection of overheated market sentiment and an important signal of a peak.
10. Significant corrections or fluctuations
In a bull market, while prices continue to rise, if there is a significant one-day drop or prolonged sideways movement, it may be a sign of capital flight.
For example, at the end of the 2017 and 2021 bull markets, Bitcoin experienced multiple significant adjustments before entering bear markets.
11. Discussions among people around you
When your friends, colleagues, and even family members who have never been exposed to cryptocurrencies start discussing buying Bitcoin or altcoins, it is time to be careful. A concentration of retail investors entering the market often indicates the end of a bull market.
In 2017 and 2021, this phenomenon was very evident, with the last buyers being those 'latecomer' novice investors.
