We may be in the middle of a bull market at the time of writing this article, but there’s still a lot of fear in the crypto community. People who have been in the game a while have seen it all before – the euphoria when Bitcoin smashes past its all-time highs, then the sickening feeling when it descends into a 30 percent drawdown a few months later.
The problem is, it’s notoriously hard to pinpoint when the cycle peak will happen. There are, however, a few telltale signs that should give some indication as to when this latest bull run is coming to an end – although it should be noted that research alone cannot predict the upswings and downturns of the market. The good news is that some optimistic analysts predict that the market will continue to stay bullish until 2026.
Crypto Hype Reaches the Mainstream
Once crypto hype booms in the mainstream, what does it mean for your market position? In the last bull market of 2021, interest in crypto spread throughout the mainstream and even reached booming online entertainment industries such as the Virtual Reality (VR), Augmented Reality (AR), and iGaming sector. The slots arena is arguably one of the best places to see what’s hot in popular culture as these games are played all over the world. For instance, the casino game NFT Megaways was released around that time, and quickly became one of the top online slot games for real money. The game uses a cryptocurrency-inspired design, with a mix of nostalgic and contemporary pixelated elements. The fact that NFT Megaways attracted so much interest highlighted how NFTs had broken out and gained widespread attention.
This coincided with the rise of well-known personalities promoting NFT projects. There was a short period of a few months when crypto tokens were all the rage, and mass amounts of people were picking them up. The likes of John Terry and Lionel Messi started getting behind NFT projects, helping spread awareness across a wide variety of demographics. If you notice this kind of hysteria across mainstream media this time, experts believe this could act as an early warning sign that the bull market could be ending – so try to pay close attention to all such indicators.
Parabolic Price Increases
Cryptocurrencies have a rich history of fluctuating prices, but Bitcoin and the other large caps usually move around steadily. They will often enter trending and ranging markets, but there are never usually any massive single-day or even weekly candles. Expert consensus is that when you start to notice massive spikes in price in Bitcoin and Ethereum over a short timeframe, it could indicate that the market is nearing its peak.
This type of parabolic rise is unsustainable and historically happens independently of other factors such as improvements in the blockchain technology. They have previously preceded a sharp correction and can provide an early warning signal. Traders would do well to stay alert to these fluctuations and appropriately gauge the risk that comes with them.
According to a piece in The Daily Hodl, Raoul Pal is predicting what he calls the “Banana Zone” soon. This is when risk-on assets enter a period of constant growth with few indications of drawdowns. This usually occurs over the course of a few months and signals the beginning of the end for the bull market. During this time, hype around cryptocurrencies tends to enter the mainstream as well.
High Volume and Liquidations
When the hype train is in full motion and every man and his dog wants to buy cryptocurrencies, the market generally tends to experience many transactions in a smaller window than usual. At the end of a bull market, there’s usually high volume as many traders are rushing to enter the market – typically driven by FOMO. When this is paired with sharp price rises, analysts suggest that the market is on its way to becoming overheated.
There could also be a massive increase in the number of liquidations, as short-term traders use heavy leverage to try to maximize their gains. Traders are more likely to go long at this time. However, the high volume can lead to drastic dips that can cause positions to be closed out. Likewise, traders who try to anticipate the peak and short the market can be closed out when the prices rise. Pay attention to indicators such as the Liquidation Heatmap from Coinglass to see when this increased activity occurs.
Decreasing Dominance of Bitcoin
Bitcoin is the grandaddy of the crypto market, and research has shown that everything else generally correlates with it most of the time. When the big boy goes up, the others rise, and when it falls, the others do so as well. However, this can change towards the end of a bull market, with various smaller cap coins outpacing the behemoth. This is known as altcoin season, and the previous bull markets have always ended with this period.
Altcoin season indicates a huge amount of retail interest getting into the crypto market. They hear about the hype of Bitcoin, check the price, and then think they’ve missed the boat. Then, they look down the list, trying to decide which alternative token could be the next big thing to boom.
The fact that altcoins are lower in price per coin helps convince people that they are cheaper as well – even though they will be investing the same amount of fiat currency regardless of the crypto they are buying.
If you pay close attention to the news and look for these common signs, you’ll have a better understanding of when the bull market is likely to reach its peak. However, it goes without saying that exercising an abundance of caution before executing or exiting any position is paramount when playing in the cryptocurrency market.
