Exploring the Crypto Market Cycle: When Will This Bull Run Come to an End?

The crypto market is currently in a thriving stage, with the price of Bitcoin driving the entire market upward. However, a common concern among investors is: when will the bull run end, and when should profits be locked in? The patterns of market cycles and capital flows may provide us with some clues.

Periodic fluctuations in financial markets are a common phenomenon, and the crypto market is no exception. These cycles reflect the flow of funds between different assets, as well as the changes in investor behavior over time.

The Four Stages of the Cryptocurrency Bull Run Cycle

Phase 1: Fiat Currency Flowing to Bitcoin

Each bull run 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. As the most recognized and liquid crypto asset, Bitcoin becomes the preferred choice for both newcomers and large capital, driving its price up and setting the tone for the entire market.

Phase 2: Funds shift from Bitcoin to large altcoins

As the Bitcoin bull run begins, investors (including large hedge funds and companies) start to turn their attention to major altcoins like ETH, SOL, and BNB in pursuit of higher returns. Bitcoin's market dominance begins to decline, marking the arrival of a comprehensive altcoin season. For example, during the bull run in 2021, after reaching its peak in March, the total market capitalization of altcoins grew by 95% over the next two months, peaking in May.

Phase 3: Capital flow towards medium market cap and popular speculation tokens

As market confidence and enthusiasm grow, investors are shifting their focus to smaller, less liquid tokens that are considered to have high potential. They speculate on mid-cap projects, hoping for 10x or even 100x returns. Market volatility intensifies, and greed and FOMO mentality begin to spread. While some tokens have gained massive profits, others quickly fade into obscurity.

Phase Four: Meme coins become the focus of the crypto market

When rationality gives way to frenzy, meme coins like DOGE, SHIB, and PEPE become the new darlings of the market. These tokens often lack substantial fundamentals, with their prices driven entirely by emotions, celebrity endorsements, and social media hype. The surge in meme coin activity often signals that market frenzy has peaked, indicating that the cycle has reached a climax and the risks in the crypto market have become too high.

Historical data shows that the peak market value of meme coins often marks the imminent decline of the entire crypto market. For example, in October 2021, the total market value of meme coins began to decline, and after Bitcoin reached its final peak in early November, it also began to fall.

Why Memecoins Indicate the End of the Bull Run Cycle

Meme coins are viewed as the final stage of the crypto bull run because they reflect the market's shift from rational investment to irrational exuberance. At this stage, fundamental analysis gives way to pure emotion (primarily greed). Those meme tokens with almost no real use begin to dominate trading volume simply because they have gone viral on social media or received community hype.

Historically, this pattern has repeated itself during each major bull run. In 2017, the market was dominated by low-quality ICO projects that lacked substantial products. In the second half of 2021, SHIB surged 1200% during the second wave of the crypto market, and began to decline at the end of October. This drop occurred two weeks earlier than Bitcoin's decline that started in early November, providing investors with a valuable warning signal.

Whenever a new encryption craze arises, it is accompanied by excessive participation from retail investors and a sharp decline in Bitcoin's dominance, ultimately leading to a crash in the entire market's prices. In past encryption booms, meme coins attracted the latest wave of liquidity, which often came from inexperienced investors seeking quick profits, indicating that the market has become overheated.

Current Market Condition Analysis

From the perspective of the overall crypto market capitalization, we can observe a breakout of the cup and handle pattern, followed by a successful breakout of the head and shoulders pattern. Both of these are bullish patterns, with targets pointing to the 4.15 trillion dollar level. This means there is about a 15% potential growth space in the crypto market. The situation for altcoins (excluding Bitcoin) is similar, with prices breaking out of the cup and handle pattern, targeting a market capitalization of 1.8 trillion dollars, which may still have a 37% growth space.

Regarding the market capitalization of meme coins, we can see a cycle of adjustments and growth that occurs every four years. Prices typically retrace more than 80%, followed by an increase of thousands of percentage points. Currently, the market capitalization is emerging from the adjustment phase, so further growth can be expected until it reaches $1 trillion, nearing the edge of a frenzy cycle. This is a positive signal for the existing crypto market and may also be an appropriate time to take profits.

However, during this bull run, meme coins may not become the dominant force of the speculative craze. Instead, we may see a new narrative emerge: Real World Assets (RWA). There are indications that this could become an important factor in triggering the next frenzy cycle.

Some noteworthy developments include:

• Several major trading platforms are currently launching or planning to offer tokenized stock trading services.
• A certain investment platform will provide tokens representing equity in well-known private equity firms.
• A well-known crypto exchange is seeking regulatory approval to offer tokenized securities.

From a technical analysis perspective, the total market capitalization of RWA previously retraced by 86%, then soared by 4500%. The current retracement has reached 93%, and the price is breaking through this stage, showing the potential for another 300% increase, reaching a market cap of 1 trillion dollars. If meme coins were the speculative climax of the last cycle, then RWA may be the profit-taking signal of this cycle.

Conclusion

The trend of the crypto market shows cyclical changes, and these cycles largely depend on the process of funds flowing from large market cap projects to small market cap projects. Although it is impossible to precisely predict market tops and bottoms, understanding the structure of the bull run cycle helps investors find better entry and exit points in the crypto market. Paying attention to the flow of funds, identifying market trends and signs of overheating, and always maintaining a clear profit strategy are key to maintaining an advantage in the highly volatile crypto market.