The crypto market seems to be entering an active growth phase. Bitcoin's price is rising, driving the entire crypto market upward. However, every investor will ask one question: When will the bull market end, and when should profits be locked in? Perhaps market cycles and liquidity levels can provide the answer.
Market cycles are a recurring phenomenon in the financial field, and cryptocurrencies are no exception. These cycles reflect changes in liquidity between different asset types and investor behavior over time.
Stages of Cryptocurrency Bull Market Cycles
Stage One: Fiat → Bitcoin
Each bull market cycle typically begins with new funds entering the crypto market through 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 most liquid crypto asset, making it the first choice for newcomers or large capital. This influx of funds drives up Bitcoin's price, setting the tone for the entire market.
Stage Two: Bitcoin → Large Altcoins
Once Bitcoin initiates a bull market, investors (including large hedge funds and companies) turn to large Altcoins like ETH, SOL, and BNB to pursue higher profits. Bitcoin's dominance begins to decline, signaling the start of a comprehensive Altcoin season.
For example, during the 2021 bull market, when Bitcoin peaked in March, the total market value of Altcoins grew by 95% two months later in May 2021, reaching its peak.
Stage Three: Large Altcoins → Mid-Cap and Hot Speculative Tokens
As confidence and enthusiasm grow, investors' attention shifts to smaller, less liquid tokens believed to have high potential. Investors speculate on mid-cap projects, hoping for 10x or even 100x returns. Market volatility increases, with greed and FOMO psychology emerging. While some coins achieve massive profits, others quickly disappear.
Stage Four: Final Stage - MEME Coins
When rationality gives way to frenzy, MEME coins like Doge, SHIB, and Pepe become market darlings. MEME coins lack fundamentals, with prices driven entirely by sentiment, celebrity endorsements, and social media hype. The surge in MEME coin activity often signals the peak of hysteria, indicating that the cycle has reached its apex and crypto market risk is too high.
Based on historical data from the previous cycle, MEME coins' peak marks the decline of the entire crypto market. In October 2021, the total market value of MEME coins began to decline, with Bitcoin reaching its final peak in early November before starting to drop.
Why MEME Coins Signal the End of a Bull Market Cycle
MEME coins mark the final stage of a crypto bull market because they reflect a shift from rational investment to hysteria. At this point, any fundamental factors give way to sentiment (primarily greed). Typically, MEME tokens with almost no utility value begin to dominate trading volumes, simply because they are trending on social media or supported by a community.
Historically, this pattern has repeated during each major surge. In 2017, it was low-quality Initial Token Offerings (ICOs) without products. In the second half of 2021, SHIB surged 1200% and began to decline in late October. With a two-week interval before Bitcoin started dropping in early November, this served as a good warning for all investors.
Each new crypto boom is accompanied by excessive retail investor participation, a sharp decline in Bitcoin's dominance, ultimately leading to a market-wide price crash. The "MEME coins" in past crypto booms attracted the latest wave of liquidity, often from inexperienced investors seeking quick profits, indicating an overheated market.
But should MEME coins still be considered now?
What is the Current Market Situation?
Looking at the entire crypto market capitalization, there will be a breakthrough in the cup and handle pattern, followed by a successful breakthrough of the head and shoulders pattern. Both are bullish formations, with targets around $4.15 trillion. This means the crypto market has about a 15% potential growth space. The situation for Altcoins (total market value 2, excluding Bitcoin) is similar. Prices break through the cup and handle formation, with a target market value of $1.8 trillion, potentially showing a 37% growth space.
What about the market value of MEME coins? A cycle of adjustment and growth can be seen every four years. Prices will retract over 80%, then grow by thousands of percentage points. Currently, the market value is emerging from an adjustment phase, so growth can be expected until reaching $1 trillion, approaching the edge of the hysteria cycle. This is a good sign for the existing crypto market and a good time to lock in profits.
However, this time, MEME coins may not lead the hype wave. They once defined the peak of the last bull market, but history does not always repeat. In this cycle, a new narrative might rise: Real World Assets (RWA). Moreover, there are indications that this could be the next major narrative to bring a new hysteria cycle.
Look at these news items:
- Robinhood will launch tokenized stock trading in Europe.
- Kraken has launched tokenized stock trading in the US.
- Investment platform Republic will offer tokens representing private equity of companies like SpaceX.
- Coinbase is reportedly seeking SEC approval to offer tokenized securities.
And that's not all.
From a technical perspective, RWA's total market value previously retracted 86% before surging 4500%. The current retraction has reached -93%, with prices breaking through this stage, indicating a potential 300% rise to a $1 trillion market value. If MEME coins were the speculative peak of the last cycle, RWA might be the profit-taking signal for this cycle.
Conclusion
Cryptocurrency trends show cyclical changes, with these cycles largely dependent on funds flowing from large-cap projects to small-cap projects. While it's impossible to precisely 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 crypto market. Pay attention to fund flows, identify trends and signs of hysteria, and always have a profit-taking plan.
