Understanding DeFi Market Cycles: Bull, Bear, and Everything Between
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Crypto markets move in cycles—periods of euphoria followed by despair, then recovery and euphoria again. Understanding where we are in the cycle helps you make better decisions and avoid costly emotional mistakes.
The Four Phases of Market Cycles
1. Accumulation Phase
After a major decline, prices stabilize at low levels.
Price action:
Sideways, low volatility
Sentiment:
Disbelief, apathy, “crypto is dead”
Who’s buying:
Smart money, long-term believers
Volume:
Low
Media:
Negative or absent
What to Do:
Research and identify quality projects
Start DCA into positions
Build your knowledge base
Set up infrastructure (wallets, strategies)
2. Markup Phase (Bull Market)
Prices begin rising, gaining momentum over time.
Price action:
Higher highs, higher lows, uptrend
Sentiment:
Optimism growing, then excitement, then greed
Who’s buying:
Early adopters, then general public
Volume:
Increasing
Media:
Increasingly positive, mainstream coverage
What to Do:
Let winners ride (don’t sell too early)
Take some profits along the way
Avoid adding at euphoric peaks
Start planning exit strategy
3. Distribution Phase
Smart money sells to late arrivals; market tops form.
Price action:
Volatile, failed new highs, range-bound
Sentiment:
Maximum euphoria, then anxiety
Who’s buying:
Latecomers, FOMO buyers
Who’s selling:
Smart money, early investors
Media:
Peak positive coverage, “to the moon”
Warning Signs:
Everyone talking about crypto
Taxi drivers giving trading tips
Celebrities launching tokens
Crazy valuations on new projects
You feel like a genius
What to Do:
Take significant profits
Move to stablecoins or less risky assets
Don’t get greedy for “just a bit more”
Avoid new speculative positions
4. Markdown Phase (Bear Market)
Prices decline, often 70-90% from peaks.
Price action:
Lower highs, lower lows, downtrend
Sentiment:
Denial → fear → panic → capitulation
Who’s selling:
Late buyers capitulating
Volume:
Spikes during panic, then declining
Media:
Negative, obituaries for crypto
What to Do:
Preserve capital (don’t catch falling knives)
Avoid panic selling at the bottom
Research for next cycle opportunities
Slowly accumulate quality assets
Build skills and knowledge
Cycle Indicators
On-Chain Indicators
Indicator
Bull Signal
Bear Signal
Exchange Reserves
Declining (accumulation)
Rising (selling pressure)
Stablecoin Supply
Growing (dry powder ready)
Declining (exiting crypto)
Active Addresses
Rising (new users)
Declining (users leaving)
Long-term Holder Supply
Increasing (conviction)
Decreasing (distribution)
Sentiment Indicators
Fear & Greed Index: Extreme fear = potential bottom; extreme greed = potential top
Social media activity: Peak mentions often coincide with tops
