The cryptocurrency market appears to be in the midst of an active bull cycle, with Bitcoin leading the charge and setting a positive tone for the broader market. The bull cycle, a recurring pattern in financial markets, reflects the movement of liquidity from large-cap to smaller, more speculative assets. Analysts have outlined a four-stage progression of the bull cycle that could offer insight into the best moments for investors to lock in profits [1].
The first phase of the cycle sees new capital flowing into the crypto market primarily through Bitcoin. As a well-recognized and liquid asset, Bitcoin is often the entry point for both institutional and retail investors. The rising price of Bitcoin, in turn, sets the stage for further market expansion [1].
In the second stage, investors shift capital from Bitcoin to large altcoins such as Ethereum, Solana, and Binance Coin. This shift is marked by a decline in Bitcoin’s market dominance and is a sign that altcoins are gaining momentum. Historical data from the 2021 bull run show that altcoin market caps often peak two months after Bitcoin’s peak [1].
The third stage sees a move to mid-cap and high-potential tokens, driven by growing investor confidence and speculation. This phase is often characterized by increased volatility and the emergence of fear of missing out (FOMO). While some investors achieve substantial returns, others may suffer significant losses as the market becomes more speculative [1].
The fourth and final stage of the bull cycle is marked by the rise of meme coins like DOGE, SHIB, and PEPE. These tokens, which typically have no fundamental value, become popular due to social media buzz and celebrity endorsements. The dominance of meme coins often signals a euphoric peak and serves as a warning that the market may soon correct. Historical patterns indicate that the peak of meme coins usually precedes a broader market downturn [1].
Currently, the total crypto market cap is showing signs of a breakout above key technical patterns, suggesting a bullish trajectory. The altcoin market, excluding Bitcoin, is also breaking out of a cup-and-handle pattern, indicating potential for further growth. Meanwhile, the memecoins market is emerging from a correction phase and may see significant growth as it approaches a new potential peak [1].
However, this cycle may differ from previous ones. Instead of meme coins, the next major trend could be Real World Assets (RWAs), which represent real-world assets like stocks and private equity tokenized on the blockchain. Recent developments, including Robinhood’s tokenized stock trading and Coinbase’s efforts to offer tokenized securities, suggest that RWAs could become a significant driver of the next phase of the bull cycle [1].
While the bull cycle offers opportunities for growth, it also presents risks. Understanding the liquidity flow and the psychological factors that drive market behavior can help investors make more informed decisions. As the cycle progresses, it becomes increasingly important to recognize signs of euphoria and to have a clear profit-taking strategy in place [1].
Source: [1] Lord of the Cycles: When to Exit This Crypto Bull Run (https://www.coingecko.com/learn/lord-of-the-cycles-when-to-exit-this-crypto-bull-run)
