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

The crypto market seems to be entering a thriving phase. The rise in Bitcoin prices has driven the prosperity of the entire encryption ecosystem. However, every investor is pondering a key question: when will this bull run come to an end, and when should profits be locked in? Perhaps we can look for answers from the perspective of market cycles and capital flows.

Market cycles are a recurring phenomenon in the financial sector, and the crypto market is no exception. These cycles reflect the flow of funds between different asset types and the changes in investor behavior over time.

The Four Stages of the Cryptocurrency Bull Run Cycle

Phase 1: Fiat Currency Inflow into Bitcoin

Each bull run cycle usually begins 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 way to enter the encryption field.

As the most recognized and liquid encryption asset, Bitcoin has become the top choice for beginners and large funds. This influx of capital has driven up the price of Bitcoin, setting the tone for the entire market.

Phase 2: Funds shift from Bitcoin to large altcoins

When Bitcoin begins to show signs of a bull run, investors (including large hedge funds and corporations) will turn their attention to large altcoins such as ETH, SOL, and BNB in pursuit of higher returns. Bitcoin's market dominance starts to decline, marking the official onset of the altcoin season.

For example, during the bull run in 2021, after Bitcoin peaked in March, the total market capitalization of altcoins grew by 95% in the following two months, reaching its peak in May 2021.

Phase 3: Fund flow towards medium market cap and popular concept tokens

As market confidence and enthusiasm grow, investors' attention shifts to smaller, less liquid tokens that are considered to have high potential. At this point, investors begin to speculate on medium-cap projects, hoping for 10x or even 100x returns. Market volatility intensifies, and greed and FOMO mentality start to spread. While some coins indeed bring substantial profits, many projects also quickly disappear in the waves of the market.

Phase Four: Meme Coins Dominate

When rationality gives way to frenzy, meme coins like DOGE, SHIB, and PEPE become the focus of the market. Meme coins typically lack substantial fundamental support, and their prices are entirely driven by market sentiment, celebrity effects, and social media popularity. The surge in meme coin activity often signals that market frenzy has peaked, indicating that the risks across the entire crypto market have become too high.

According to historical data from the previous cycle, the peak value of meme coins often marks the impending 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 last peak in early November, it soon started to fall back.

Why Meme Coins Signal the End of a Bull Run Cycle

Meme coins are considered the final stage of the crypto market bull run because they reflect a shift in investment behavior from rational decision-making to pure frenzy. At this stage, any fundamental factors give way to emotion-driven behavior (primarily greed). Those meme tokens, which usually have little to no real use, suddenly dominate trading volume simply because they have gone viral on social media or are favored by certain communities.

Historically, this pattern tends to repeat itself during each major market 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 by 1200% during the second wave of the crypto market, before starting to decline at the end of October. Notably, there was about a two-week lag before Bitcoin began its decline in early November, providing astute investors with a valuable warning signal.

Every time a new encryption craze arises, it is accompanied by excessive participation from retail investors, a sharp decline in Bitcoin's market dominance, and ultimately leads to a crash in the overall market prices. In past encryption crazes, "meme coins" often attracted the last wave of liquidity, with funds typically coming from inexperienced investors seeking quick profits, which usually means the market has overheated.

Current Market Situation Analysis

From the overall cryptocurrency market capitalization perspective, we can observe that the market has broken through the cup and handle pattern, and subsequently successfully broke through the head and shoulders pattern. Both of these technical patterns are considered bullish signals, with targets pointing to a level of $4.15 trillion. This means that the crypto market may have about 15% potential growth space left. The situation for altcoins (total market capitalization excluding Bitcoin) is similar. Prices have broken through the cup and handle pattern, with a target market capitalization reaching $1.8 trillion, and potential growth space may be as high as 37%.

Regarding the market value trends of meme coins, we can observe a cycle of adjustment and growth that occurs every four years. Prices typically retrace by more than 80%, followed by an increase of thousands of percentage points. Currently, the market value of meme coins is exiting the adjustment phase, so we can expect further growth until it approaches the edge of a $1 trillion frenzy cycle. This is a positive signal for the existing crypto market and also reminds investors to consider locking in profits at the right time.

However, in this round of bull run, meme coins may not become the main characters leading the hype. Although they defined the market peak in the last bull run, history does not always repeat itself simply. In this cycle, we may see a new narrative rise: Real World Assets (RWA). There are signs that this may become an important factor in triggering the next frenzy cycle.

The Rise of Real World Assets (RWA)

Recent market trends indicate that RWA may become a new investment hotspot:

• Many well-known trading platforms are currently offering or planning to launch tokenized stock trading services.
• A certain investment platform will provide tokens representing private equity of companies such as SpaceX.
• Several large cryptocurrency exchanges are seeking regulatory approval to offer tokenized securities services.

From a technical analysis perspective, the total market capitalization of RWA has previously experienced an 86% correction, followed by a surge of 4500%. The current correction has reached 93%, and the price is breaking through this phase, indicating the potential for another 300% increase, reaching a market capitalization of 1 trillion USD. If meme coins were the speculative peak of the previous cycle, then RWA is likely to become the profit-taking signal of this cycle.

Conclusion

The trends in the crypto market exhibit cyclical changes, largely depending on the flow of funds from large-cap projects to small-cap projects. While it is impossible to precisely predict the tops and bottoms of the market, by understanding the structure of bull run cycles and human psychological factors, investors can better grasp the timing of entry and exit in the crypto market. Closely monitoring capital flows, identifying market trends and signs of excessive euphoria, and always staying vigilant to formulate reasonable profit-taking plans are key strategies to protect one's interests in the highly volatile cryptocurrency market.