Lord of the Cycles: When to Exit This Crypto Bull Run?

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Introduction

The crypto market seems to be entering a phase of active growth. Bitcoin is rising, pushing the rest of the crypto market with it. But every investor asks a question: when does the bull phase end, and when should we lock in profits? Market cycles and the liquidity hierarchy can tell us about this.

Market cycles are a recurring phenomenon in finance, and cryptocurrencies are no exception. These cycles reflect the movement of liquidity between different asset types and investor behavior over time.

The Stages of a Crypto Bull Cycle

Stage 1: Fiat → Bitcoin

Every bull cycle usually begins with new capital flowing into the crypto market through Bitcoin. Institutionalists, hedge funds, and cautious retail investors see BTC as the safest and most reliable way to enter cryptocurrency.

Bitcoin is the most recognized, and liquid crypto asset, making it a prime asset for first-time or large capital. This influx drives up the price of bitcoin, setting the tone for the entire market.

Stage 2: Bitcoin → Large Altcoins

As soon as bitcoin starts a bullish trend, investors (including large hedge funds and companies) look to large altcoins such as Ethereum (ETH), Solana (SOL), Binance Coin (BNB), and others in pursuit of higher profits. Bitcoin's dominance will begin to fall, marking the beginning of a full-fledged altcoin season.

For example, during the bull run in 2021, when bitcoin peaked in March, the Total Market Cap of altcoins increased by another 95% to its peak in May of 2021, with a 2-month gap. 

Stage 3: Large Altcoins → Mid-Cap & Hype Tokens

As confidence and excitement grows, investor attention shifts to smaller, less liquid tokens with perceived high potential. Investors speculate on mid-capitalization projects, seeking 10x or even 100x returns. Volatility increases, greed and FOMO emerges. While some tokens make huge profits, others disappear just as quickly.

Stage 4: The Final Stage — Meme Coins

When logic gives way to euphoria, meme coins like DOGE, SHIB and PEPE become market favorites. Lacking fundamental value, meme coins are driven solely by emotion, celebrity endorsements and social media buzz. An explosion of meme activity often signals a euphoric peak, a sign that the cycle has peaked and the risk in the crypto market is already excessive.

Based on historical data from the past cycle, we can see that the peak of meme coins marked the fall of the entire crypto market. In October 2021, the total capitalization of meme coins began its decline, and in early November, Bitcoin reached its last peak and rolled downward.

Why Meme Coins Signal the End of a Bull Cycle

Meme coins signal the final stage of a cryptocurrency bull cycle, as they reflect the transition from rational investing to euphoria. At this point, any fundamentals take a back seat to emotions (mostly greed). Meme tokens, which normally have little to no utility and value, begin to dominate trading volumes simply because they are trending on social media or are supported by their community.

Historically, this pattern has repeated itself during every major upswing. In 2017, it was low-quality ICOs with no products. In the second half of 2021, SHIB soared by 1200% on a second wave of a crypto rally and started to fall at the end of October. There was a two-week gap before Bitcoin started to fall at the beginning of November, so there was a good warning for all investors.

Each time, the explosion of interest in new cryptocurrency hype has coincided with excessive retail participation, a sharp decline in bitcoin's dominance, and, ultimately, a market-wide price crash. The meme coins in past crypto rallies have attracted the latest wave of liquidity, often from inexperienced investors looking for quick profits, which signals that the market is overheated.

But should we watch for meme coins now?

What’s Happening Now in the Market?

Looking at the Total Crypto Market Cap, we will see a breakout above the cup-and-handle formation, followed by a successful breakout from a head-and-shoulders pattern. Both are bullish patterns with a similar target at $4.15T level. It's about 15% of organic technical growth for the crypto market.

It's almost the same situation with altcoins (Total 2, excluding BTC). The price broke above the cup-and-handle pattern and is targeting $1.8T of capitalisation with a possible growth of 37%. 

But what about the Memecoins Market Cap? We can see the repeating cycles of correction and growth every four years. The price corrects for 80+ percent and grows by a few thousand percent afterward. Now, the capitalisation is coming out of the correction phase so that we can expect further growth until 1T on the edge of the euphoria cycle. That's a good sign for the existing crypto market and fixing your profits.

But meme coins may not lead the hype this time. They defined the peak of the previous bull run, but history doesn’t always repeat itself. In this cycle, we possibly can see the rise of a new narrative: Real World Assets (RWA). And news suggest this could be the next major trend that can offers new euphoria cycle.

Just look at the news:

• Robinhood is launching tokenized stock trading in Europe.

• Kraken has introduced trading for tokenized shares in the US.

• Republic, an investment platform, will offer tokens representing private equity in companies like SpaceX.

• Coinbase is reportedly seeking SEC approval to offer tokenized securities.

And that’s not all of them. 

From a technical perspective, the RWA total market cap previously corrected by 86%, followed by an explosive 4500% rise. The current correction has already reached -93%, and the price is now breaking out of this phase, showing potential for another 300% rise, possibly reaching the $1 trillion cap. If meme coins were the speculative climax of the last cycle, RWAs could be the canary in the coalmine for this one.

Conclusion

Cryptocurrencies move in cycles, and these cycles are largely determined by liquidity flowing from large-cap projects to small-cap projects. While it is impossible to predict exact tops and bottoms, understanding the structure of the bull cycle based on human psychology will help you find optimal entry and exit points in the crypto market. Watch where the money flows, recognize trends and signs of euphoria, and always have a profit taking plan.

This article is by FBS analysts and is not intended to serve as investment or financial advice. Always do your own research before investing in any cryptocurrency.