Insight into the Four Stages of a Bull Market in Crypto: How to Invest in Cryptocurrency Across Different Cycles?
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Insight into the Four Stages of a Bull Market in Crypto: How to Invest in Cryptocurrency Across Different Cycles?
If you want to achieve excess returns in a bull market, the earlier you place your bets—before others enter—the better.
Navigating Web3 tides with focused insightsWritten by: Edgy
Translated by: TechFlow
There are four stages in a bull market.
We are currently at the end of the first stage of the bull market (Note: This article was written several months ago; the author now believes we have entered the second stage of the bull market). Below are some guidelines and suggestions on how to navigate market cycles and avoid missing out on substantial profits.
Here are your actionable recommendations:
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Understand each phase of the bull market
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Maximize profit potential
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Avoid the most common pitfalls
Stage One: Accumulation Phase
The accumulation phase is where the market currently stands—and has stood for the past year. After the panic caused by the Terra collapse, FTX collapse, and USDC de-pegging, the cryptocurrency market hit rock bottom.
The hardest part of the market cycle is behind us (unless there's a major crisis involving Binance or USDT that could impact the entire industry).
The broader market is currently holding steady with minor price fluctuations. Major industry news has little effect on overall prices (e.g., PayPal launching its stablecoin). At this point, no significant new liquidity from outside capital is entering the crypto space. Instead, existing capital within the market is being rotated among participants, with various altcoin sectors taking turns receiving inflows.
This is the accumulation phase. It’s time to begin strategically deploying capital into the market to position yourself for gains during the upcoming bull run.
Actionable advice:
- Identify high-quality projects. Look for projects you believe will thrive in the coming bull market. Key traits of strong projects include product-market fit, competitive advantages over peers, active development teams, clear roadmaps, and solid financial health.
- Save capital. Many investors want to buy tokens from projects that peaked in the previous bull market, as their prices are now down 90% from all-time highs. However, the top performers in the next cycle are likely not yet launched. Investors are increasingly favoring early positions in brand-new projects rather than chasing old names.
- Limit trading frequency. Even though current market conditions may feel dull, don’t trade just out of boredom. Surviving in crypto comes before profiting. Wait for better opportunities instead of making impulsive trades due to restlessness.
- Learn during the bear market. A bull market isn't the time to learn—it’s the time to make money. The bear market is when you should study and prepare.
- Monitor liquidity. Keep an eye on CEX inflows, stablecoin minting activity, DeFi protocol TVLs, and total crypto market cap. Changes in these indicators reflect shifts in market liquidity. Increasing liquidity signals improving market conditions.
Stage Two: Early Bull Market
Market sentiment begins to improve and prices start rising, but many remain skeptical about the arrival of a bull market.
The hardest mental hurdle is believing that a bull market has actually begun. After suffering losses during the bear market, investor psychology often prevents them from fully benefiting during the upswing. Many hesitate, fearing further declines. If you want outsized returns, you must place your bets early—before others jump in!
What could trigger a bull market?
- Major industry events—for example, approval of a BTC or ETH ETF, or a country adopting Bitcoin as legal tender.
- The Bitcoin halving event in 2024. While past halvings led to price increases, it doesn’t guarantee a rise next year. However, if enough people believe the halving will drive prices up, that collective expectation can become self-fulfilling.
- New narratives. In the last bull market, DeFi and NFTs were the dominant themes. What will drive this one? GambleFi? Telegram bots? RWA? GameFi? Or will NFTs reignite the market? Most likely, it will be an area currently flying under the radar—perhaps something like Axie Infinity or Stepn, but with improved tokenomics and gameplay mechanics.
- Improving macro conditions. For instance, the Federal Reserve pausing rate hikes, which could free up more liquidity to flow into crypto.
- Regulatory clarity. Clearer and more effective regulation from the U.S. and other countries could boost investor confidence.
- Improved accessibility. Entering crypto remains difficult for average users. More user-friendly wallets and beginner-oriented dApps will help onboard new participants.
- Eastern markets. Crypto builders and investors on Twitter often exhibit regional bias, favoring Western markets. That’s why many fail to understand Tron’s popularity (which has massive adoption in Asia). Markets like South Korea and Hong Kong also play a significant role.
In reality, just one major catalyst can set off a chain reaction.
As conditions improve, some insiders start making profits. They upgrade their lifestyles and share their success with friends and family, who then FOMO into the market. This brings in fresh external capital, pushing prices higher and creating a positive feedback loop.
Actionable advice:
1. Reduce positions in losing assets, increase exposure to winning ones. Cut losses promptly and avoid emotional attachment. Just because a token or protocol has already returned 5x doesn’t mean it can’t go 10x—but assess based on metrics and market sentiment. For losing investments, reduce exposure quickly.
2. Take profits during rallies and set clear take-profit levels. No one sells at the absolute top. Build a disciplined profit-taking strategy and stick to it.
3. Manage altcoin and meme coin allocations carefully. Do not use household savings, retirement funds, or sell BTC and ETH to heavily invest in altcoins. You can participate, but avoid going all-in or using high leverage—risks are too high.
4. Invest with simplified logic ("Dumb Money" approach). History shows that some of the fastest-rising tokens often have weak fundamentals and poor tokenomics. Remember: price rises only when there's market hype and widespread buying. Most investors don’t analyze project mechanics or economic models—where there's consensus, prices follow.
5. Watch out for Ponzi schemes. During bull markets, some projects manipulate sentiment and pump prices. But all Ponzi schemes eventually collapse. You can ride them for profit, but exit before the crash—or simply avoid them altogether.
6. Don’t ignore retail sentiment. Crypto podcasts and conferences often focus on cutting-edge technologies, which can create an echo chamber. Average investors don’t understand complex jargon. To stay ahead, engage with retail communities—check Reddit, YouTube, and social media to see what ordinary users are excited about.
7. Focus on specific niches. Develop expertise in a few key areas. In crypto, it’s impossible to track every trend or catch every moonshot. Missing some great projects or doubling coins is acceptable. Start focusing now on the domains you understand best—when opportunity strikes, seize it!
Stage Three: Peak of the Bull Market
This is when retail investors from outside the crypto world start flooding in. They enter at the peak, yet believe they’re joining in the early stages.
The bull market feeds on a positive feedback loop: rising prices generate FOMO, leading to more buying, which pushes prices even higher.
Everything goes up. Altcoins worth $10,000 can dramatically change your life. You might even overhear strangers on the street casually discussing crypto while walking through town.
FOMO intensifies. Some may quit their jobs to become full-time crypto traders. Others might sell their homes to invest.
How can you tell when the market has peaked?
- Mainstream media starts covering crypto. You’ll repeatedly hear stories like someone searching for a cold wallet with 8,000 BTC, or how 10,000 BTC once bought two pizzas.
- Financial YouTubers like MeetKevin, Max Maher, and Graham Stephen begin uploading multiple crypto videos daily.
- Mainstream brands like Pepsi and McDonald’s start referencing crypto to boost relevance. Celebrities try to cash in via sponsorships or launching their own NFT collections.
- Everyone starts flexing their gains. When KOLs and investors on Twitter constantly post screenshots of massive profits, it’s a red flag—the market may be topping out.
Everyone will try to convince you this time is different. You must resist your instincts.
At this stage, most believe the bull run will continue and prices will keep climbing. But the real question becomes: when to exit? Stay calm and remember—no market rises forever.
Convert unrealized gains into realized profits. Cash out—that’s what matters most!
Stage Four: The Downturn
What goes up fast comes down fast. The peak has passed. At this stage, everyone speculates whether this is truly the top or if another rally lies ahead.
You’ll hear claims like: “This time is different—crypto has gone mainstream! The bull market will last years!”
There’s a reason behind every FOMO push. From a project’s perspective, attracting more retail investors means more funding. From a retail standpoint, more speculative capital flowing into altcoins drives prices higher. So they keep FOMO-ing you, keep shilling.
Even as the bear market sets in and prices fall, occasional hotspots still emerge. Bitcoin peaked in November 2021, yet in the following months, tokens like FTM and Luna continued to rise.
Once prices crash, hindsight experts appear saying: “I told you so!”
After missing the previous two-year bull market, what makes me so confident another one is coming?
Because I’ve bet my entire career and the next ten years of my life on DeFi. I have full confidence in this space.
Let me briefly explain why:
Under current economic conditions, life is becoming increasingly difficult for ordinary people, evident in several ways:
- Credit card debt at record highs
- Per capita debt at record highs
- Rising student loan repayments
- Credit card interest rates at record highs
- Interest payments on debt nearing all-time highs
- Average monthly car payments at record highs
- Housing prices need no introduction
These economic pressures make life extremely challenging. Living costs rise every year, and the traditional path—going to college and getting a job—is no longer sufficient to afford homeownership.
Meanwhile, societal expectations around success continue to rise.
Among today’s youth, no one wants to grow slowly or achieve financial freedom only in middle or old age. Young people want wealth now—they want massive riches while still young.
For young people, cryptocurrency is not just a new financial asset—it’s a dream. To them, there’s no faster way to make money than crypto.
Crypto represents a golden opportunity for young people to realize their dreams and transform their lives.
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