Crypto Market Cycle Analysis: Capital Flow from Bitcoin to Emerging Assets

The cryptocurrency market is currently in an upward phase, with the rise in Bitcoin prices driving the overall market higher. However, investors are generally concerned about when this bull market will end and what the best time to take profits is. By analyzing market cycles and capital flows, we may be able to find the answers.

The cyclical characteristics of financial markets also apply to the crypto market. These cycles reflect the flow of funds between different assets and the changing behavior of investors over time.

Four Stages of the Cryptocurrency Bull Market Cycle

Phase One: Capital inflow into Bitcoin

Each round of a bull market typically begins with new funds entering the crypto market through Bitcoin. Institutional investors, hedge funds, and cautious retail investors generally view Bitcoin as the safest and most reliable way to enter the crypto space. As the most recognized and liquid crypto asset, Bitcoin has become the first choice for both newcomers and large funds, driving its price upward and setting the tone for the entire market.

Phase Two: Funds Shift to Large Alternative Coins

With the Bitcoin market starting to rise, investors ( including large funds and companies ) began to shift their capital towards major alternative coins like ETH, SOL, and BNB in pursuit of higher returns. The decline in Bitcoin's dominance marks the beginning of a comprehensive altcoin market. For example, during the bull market in 2021, after Bitcoin peaked in March, the total market value of alternative coins grew by 95% in May.

Phase Three: Mid-cap and popular projects favored

Market confidence and enthusiasm are increasing, with investors turning to smaller tokens that are considered to have high potential. They are speculating on medium market cap projects, hoping for 10x or even 100x returns. Market volatility is intensifying, with greed and herd mentality prevailing. Some coins have gained huge profits, but there are also some that quickly disappear.

Phase Four: Meme Coin Explosion

When rationality gives way to frenzy, meme coins like DOGE and SHIB become the focus of the market. These tokens lack fundamentals, and their prices are completely driven by emotions, celebrity effects, and social media popularity. A surge in meme coin activity often indicates a peak of enthusiasm, suggesting that the market cycle is nearing its apex and that risks have become too high.

Historical data shows that meme coins peaks often signal an impending decline in the overall market. In October 2021, the total market value of meme coins began to decline, and after Bitcoin reached its final peak in early November, it subsequently fell.

Why Meme Coins Indicate the End of the Bull Market

Meme coins represent the final phase of the crypto market bull run, reflecting a shift in investment philosophy from rationality to frenzy. At this point, fundamental analysis gives way to pure emotion driven mainly by greed (. Some tokens lacking real value dominate trading volume solely based on social media hype.

This pattern has repeatedly appeared in previous surges. In 2017, there were low-quality ICO projects, and in the second wave of the surge in the second half of 2021, SHIB skyrocketed by 1200%, and began to decline at the end of October. This decline was two weeks ahead of Bitcoin's drop in early November, providing a warning for investors.

Each new wave of encryption enthusiasm is accompanied by excessive participation from retail investors and a sharp decline in Bitcoin's dominance, ultimately leading to a market crash. "Meme coins" attract the last wave of liquidity, usually from inexperienced investors, indicating that the market has overheated.

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Current Market Situation Analysis

From the perspective of the overall crypto market capitalization, after breaking through the cup and handle pattern and the head and shoulders bottom pattern, the target is set at $4.15 trillion, indicating a growth potential of about 15%. The total market capitalization of altcoins excluding Bitcoin is similar, with a target market value of $1.8 trillion, which may have a 37% increase potential.

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The meme coin market value shows a four-year cycle of adjustment and growth. It is currently exiting the adjustment phase, and is expected to further grow to around 1 trillion dollars, approaching the edge of a frenzy cycle. This is a positive signal for the current market and also indicates a time to take profits.

![Overview of the crypto bull market cycle: When will this bull market end?])https://img-cdn.gateio.im/webp-social/moments-4d020c4d42cbb0a860023cf53c477ec2.webp(

However, this round of cycle meme coins may no longer lead the hype. Instead, real-world assets )RWA( may become the new dominant narrative. Several well-known trading platforms are currently launching or planning to launch tokenized stocks, private equity, and other products, indicating that this trend is on the rise.

From a technical perspective, RWA's total market capitalization previously pulled back 86% before rising 4500%. The current pullback has reached 93%, and the price is breaking through this stage, indicating the potential for another 300% increase to reach a market cap of 1 trillion dollars. If meme coins defined the speculative peak of the last cycle, then RWA may become the profit signal of this cycle.

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![Overview of the crypto bull market cycle: When will this bull market end?])https://img-cdn.gateio.im/webp-social/moments-5094f01fbeb37718a99cfe567a2c6878.webp(

Conclusion

The trends of cryptocurrencies show cyclical changes, largely depending on the flow of funds from large-cap to small-cap projects. Although it is impossible to accurately predict peaks and troughs, understanding the structure of bull market cycles helps grasp the best entry and exit points. Investors should closely monitor the flow of funds, identify trends and signs of overheating, and always maintain rationality to formulate reasonable profit plans.