Crypto Market Cycle Analysis: When Will the Bull Run End?

The cryptocurrency market is currently in an active growth phase, with the rise in Bitcoin prices driving the overall market higher. However, a common concern among investors is: how to determine when the bull run ends and when to take profits? By analyzing market cycles and the hierarchy of capital flows, we might find the answer.

Cyclical phenomena in the financial sector also exist in the crypto market. These cycles reflect changes in liquidity between different asset types, as well as the evolution of investor behavior over time.

The Four Stages of the Cryptocurrency Bull Run Cycle

Phase 1: Fiat Currency Flow into Bitcoin

Each bull run usually starts with new funds entering the crypto market through Bitcoin. Institutional investors, hedge funds, and cautious retail investors often view Bitcoin as the safest and most reliable gateway to the crypto space. As the most recognized and liquid crypto asset, Bitcoin becomes the preferred choice for newcomers and large investors, driving its price up and setting the tone for the entire market.

Phase 2: Funds shifting towards large altcoins

As the Bitcoin market strengthens, investors are starting to shift their focus towards large altcoins like ETH and SOL in pursuit of higher returns. The decline of Bitcoin's market dominance marks the beginning of a full-fledged altcoin season. For example, during the 2021 bull run, after Bitcoin peaked in March, the total market value of altcoins grew by 95% in the following two months.

Phase 3: Medium market cap and popular projects are in focus

When market confidence and enthusiasm are high, investors' attention turns to smaller projects that are seen as having potential. Speculators expect to achieve returns of 10 times or even 100 times on medium-cap projects. Market volatility intensifies, and greed and FOMO spread. Although some cryptocurrencies have gained huge profits, many projects also prove to be fleeting.

Phase Four: The Rise of Meme Coins

When rationality gives way to frenzy, meme coins like DOGE and SHIB become the focus of the market. These types of tokens lack substantial support, and their prices are entirely driven by emotions, celebrity effects, and social media buzz. The surge in meme coin activity often indicates that market frenzy has reached its peak, suggesting that risks in the crypto market are on the rise.

Historical data shows that the peak market capitalization of meme coins usually marks the impending decline of the entire crypto market. In October 2021, the total market capitalization of meme coins began to decline, and shortly after Bitcoin reached its final high point in early November, it fell back.

Why Do Meme Coins Indicate That the Bull Run Is Coming to an End?

Meme coins represent the final stage of the crypto bull run, reflecting a shift in investment ideology from rationality to frenzy. At this point, fundamental analysis gives way to pure emotional drive (mainly greed). Those meme tokens with almost no real use dominate trading volume solely based on social media hype or community support.

This pattern repeats during each major bull run. 2017 was a frenzy of numerous low-quality ICO projects; in the second half of 2021, SHIB skyrocketed by 1200% in a short period and began to decline at the end of October, providing a warning for Bitcoin's drop two weeks later.

Each new wave of crypto enthusiasm is accompanied by excessive participation from retail investors and a sharp decline in Bitcoin's dominance, ultimately leading to an overall market crash. Meme coins attract the last wave of inexperienced investors chasing quick riches, which usually means the market has overheated.

Current Market Condition Analysis

From the perspective of the total market capitalization of cryptocurrencies, it is currently showing a breakout of the cup and handle pattern and the head and shoulders pattern, both of which are bullish signals, indicating that the market may have about 15% growth potential. The situation in the altcoin market (excluding Bitcoin) is similar, with a potential for a 37% increase after breaking out of the cup and handle pattern.

The market value of meme coins shows a four-year cycle of adjustment and growth. Each round of adjustment exceeds 80%, followed by thousands of times growth. Currently, the market value of meme coins is emerging from the adjustment phase, expected to further grow to around 1 trillion dollars, nearing the edge of a bull run, which may be an appropriate time to take profits.

However, the protagonist of this bull run may no longer be meme coins. The tokenization of real-world assets (RWA) could become the new hot narrative. Several well-known trading platforms and investment institutions are laying out plans in areas such as tokenized stocks and private equity, indicating that RWA may lead the next wave of frenzy.

From a technical perspective, the total market value of RWA has increased by 4500% after experiencing an 86% pullback. Currently, the pullback has reached 93%, and the price is breaking through this stage, showing potential to rise another 300% to reach a market value of 1 trillion dollars. If meme coins defined the peak of the previous cycle, then RWA may become the terminal signal of the current cycle.

Conclusion

The cryptocurrency market exhibits cyclical changes, which 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 run cycles helps to grasp the best entry and exit points. Investors should closely monitor capital flows, identify market trends and signs of euphoria, and always maintain a clear profit strategy.