Crypto Market Cycle Analysis: The Evolution from Bitcoin to Popular Assets

The crypto market is showing a booming development trend. The rise in Bitcoin prices has led the upward trend of the entire industry. However, a common concern among investors is: when will this bull market end, and when is the best time to lock in profits? Market cycle theory and capital flow patterns may provide us with some insights.

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

The Four Stages of the Cryptocurrency Bull Market Cycle

Phase One: Fiat Currency Inflow into Bitcoin

Each bull market typically 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 entry point into the crypto space. As the most recognized and liquid crypto asset, Bitcoin has become the preferred choice for newcomers and large funds. This influx of capital drives up the price of Bitcoin and sets the tone for the entire market.

Phase 2: Funds flow from Bitcoin to large altcoins

Once Bitcoin starts an upward trend, investors ( including large funds and enterprises ) will turn to mainstream altcoins such as ETH, SOL, and BNB in pursuit of higher returns. Bitcoin's market share begins to decline, marking the arrival of a full altcoin season. For example, in the 2021 bull market, after Bitcoin peaked in March, the total market value of altcoins grew by 95% in the following two months, reaching a high in May.

Phase Three: Capital flows to medium market cap and popular project tokens

As market confidence and enthusiasm rise, investors begin to focus on smaller, less liquid tokens that are considered to have high potential. Investors speculate on medium market cap projects, hoping for returns of 10x or even 100x. Market volatility intensifies, with greed and panic coexisting. Some tokens yield enormous returns, but many are also fleeting.

Phase Four: Meme Coin Craze

When rationality gives way to frenzy, meme coins like DOGE, SHIB, and PEPE become the darlings of the market. These tokens lack fundamental support, and their prices are entirely driven by sentiment, celebrity endorsements, and social media hype. The surge in activity of meme coins often signals that frenzied sentiment has peaked, indicating that the market cycle has reached its high point, and the risks associated with crypto assets are too high.

According to the data from the previous cycle, the peak market value of meme coins often marks a turning point for the entire crypto market. In October 2021, the total market value of meme coins began to decline, and after Bitcoin reached its last peak in early November, it immediately fell.

Why Meme Coins Indicate the End of a Bull Market Cycle

Meme coins mark the final stage of the crypto market bull run, as they reflect a shift in investment logic from rationality to frenzy. At this point, any fundamental factors give way to pure emotion ( mainly greed ). Meme tokens with almost no practical use begin to dominate trading volumes, simply because they go viral on social media or are favored by the community.

Historically, this pattern has repeated itself in every round of significant increases. In 2017, it was those low-quality ICO projects lacking product support. In the second half of 2021, SHIB soared 1200% during the second wave of the crypto market rise and began to decline at the end of October. This drop occurred two weeks earlier than Bitcoin's decline in early November, providing investors with a valuable warning signal.

Every time a new crypto boom emerges, it is accompanied by excessive participation from retail investors, a sharp decline in Bitcoin's dominance, and ultimately leads to a market-wide price crash. In past crypto booms, "meme coins" attracted the latest wave of liquidity, often coming from inexperienced investors seeking quick profits, indicating that the market has overheated.

Current Market Situation Analysis

From the perspective of the overall crypto market capitalization, a breakout of the cup-and-handle pattern can be observed, followed by a successful breakout of the head-and-shoulders pattern. Both of these are bullish signals, with a target price level around $4.15 trillion. This means that the crypto market still has about 15% potential upside. The situation for alternative coins ( is similar to that of Bitcoin ). The price has broken through the cup-and-handle pattern, with a target market capitalization of $1.8 trillion, which may still have a 37% growth potential.

The market value of meme coins shows a cyclical adjustment and growth every four years. Prices usually retrace by over 80%, followed by increases of thousands of percentage points. Currently, the market value is emerging from the adjustment phase, so further growth can be expected until it reaches 1 trillion USD, approaching the edge of a frenzy cycle. This is a positive signal for the existing crypto market and indicates a possible upcoming opportunity for profit-taking.

However, during this cycle, meme coins may not become the dominant hotspot. While they defined the peak of the last bull market, history does not always repeat itself simply. In this cycle, we may see a new narrative rise: the tokenization of real-world assets (RWA). There are signs that this could become an important driving force for triggering a new frenzy cycle.

Conclusion

The crypto market exhibits cyclical changes, and these cycles largely depend on the flow of funds from large-cap projects to small-cap projects. While it is impossible to accurately predict the tops and bottoms, understanding the structure of bull market cycles helps investors grasp better entry and exit points. Paying attention to the flow of funds, identifying market trends and signs of excessive euphoria, and always maintaining a clear profit strategy are key to succeeding in this highly volatile market.