Author: Coingecko
Compiled by: Felix, PANews
The crypto market seems to be entering a phase of active growth. The rise in Bitcoin prices has led to a rise in the entire crypto market. But every investor will ask a question: when will the bull market end and when is it time to lock in profits? Perhaps market cycles and liquidity levels can provide the answer.
Market cycles are a recurring phenomenon in finance, and cryptocurrencies are no exception. These cycles reflect changes in liquidity between different asset classes and investor behavior over time.
Phases of the Cryptocurrency Bull Cycle
Phase 1: Fiat → Bitcoin
Each bull market cycle usually begins with new money flowing into the crypto market through Bitcoin. Institutional investors, hedge funds and cautious retail investors see 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 asset of choice for newcomers or big money. This influx of money pushes up the price of Bitcoin, setting the tone for the entire market.
Phase 2: Bitcoin → Large Altcoins
Once Bitcoin started its bull run, investors (including large hedge funds and companies) turned to large altcoins such as ETH, SOL, BNB, etc. in pursuit of higher profits. Bitcoin's dominance began to decline, marking the beginning of a full-scale alt season.
For example, during the 2021 bull run, when Bitcoin peaked in March, the total market capitalization of altcoins grew another 95% to reach its peak two months later in May 2021.
Phase 3: Large Altcoins → Mid-Cap and Hot Hype Tokens
As confidence and enthusiasm grew, investors’ attention turned to smaller, less liquid tokens that were considered to have high potential. Investors speculated on mid-cap projects, expecting 10x or even 100x returns. Market volatility increased, and greed and FOMO emerged. While some coins made huge profits, others quickly disappeared.
Phase 4: Final Phase — Meme Coin
When rationality gives way to enthusiasm, meme coins like DOGE, SHIB and PEPE become the new favorites of the market. Meme coins lack fundamentals, and their prices are driven entirely by emotions, celebrity endorsements and social media popularity. A surge in meme coin activity often heralds the peak of the frenzy, indicating that the cycle has reached its peak and the risks in the crypto market have become too high.
According to historical data from the previous cycle, the peak of Meme Coin marked the decline of the entire crypto market. In October 2021, the total market value of Meme Coin began to decline, and Bitcoin reached its last peak in early November, and then began to fall.
Why Meme Coin Signals the End of the Bull Cycle
Meme coins mark the final stage of the crypto bull run as they reflect the shift from rational investment to mania. This is when any fundamentals give way to emotion (mostly greed). Meme tokens, which often have little utility value, begin to dominate trading volume simply because they are trending on social media or have community support.
Historically, this pattern has recurred during every major rally. In 2017, it was low-quality ICOs with no product. In the second half of 2021, SHIB surged 1,200% in the second wave of cryptocurrency rally and began to fall in late October. There was a two-week gap before Bitcoin began to fall in early November, so this is a good early warning for all investors.
Each time a new crypto craze emerges, it is accompanied by excessive participation by retail investors, a sharp decline in Bitcoin dominance, and ultimately a collapse in prices across the entire market. “Meme coins” from past crypto crazes have attracted the latest wave of liquidity, often from inexperienced investors seeking quick profits, a sign that the market has become overheated.
But should you still be concerned about meme coins now?
What is the current market situation?
Looking at the entire cryptocurrency market cap, we will see a breakout of the cup-with-handle pattern followed by a successful breakout of the head-and-shoulders pattern. Both of these are bullish patterns with targets at the $4.15 trillion level. This means that the cryptocurrency market has about 15% potential growth. The situation is similar for altcoins (total market cap 2, excluding Bitcoin). A breakout of the cup-with-handle pattern targets a market cap of $1.8 trillion with a potential 37% growth.
But what about the market cap of meme coins? We can see that every four years there is a cycle of correction and growth. Prices will retrace by more than 80%, followed by thousands of percentage points of growth. Now that the market cap is coming out of the correction phase, we can expect it to grow further until it reaches $1 trillion, close to the edge of the mania 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 last bull run, but history doesn’t always repeat itself. This cycle may see the rise of a new narrative: real world assets (RWA). And there are reports that this may be the next big narrative that can bring about a new cycle of mania.
Check out these news:
- Robinhood to 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 stakes in companies such as SpaceX.
- Coinbase is reportedly seeking approval from the U.S. SEC to offer tokenized securities.
And that’s not all.
From a technical perspective, the total market value of RWA had previously pulled back 86% and then soared 4,500%. The current pullback has reached -93%, and the price is breaking through this stage, showing the potential to rise another 300% to a market value of $1 trillion. If meme coins were the speculative climax of the last cycle, then RWA may be the profit-taking signal of this cycle.
in conclusion
Cryptocurrencies move in cycles, and these cycles are largely determined by 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 cycles based on human psychology will help you find the best entries and exits in the crypto market. Pay attention to the flow of funds, identify trends and signs of mania, and always have a plan for profit taking.
