How to Spot the Top in a Cryptocurrency Bull Market

Reading Time: 4 minutes
  • The 2017-18 cryptocurrency bull market left millions of amateur investors high and dry when the bubble burst
  • Looking back, there were several signs that that market was getting out of control
  • What are the signs that the musical chairs are about to stop and you should consider selling?

In a technical sense, market tops are not always easy to spot at the time. In hindsight you can easily see the candle that signified that the party was over, but not usually when it happens. The 2017/2018 cryptocurrency bull market was much the same, with only the educated and experienced realising that $20,000 was where Bitcoin was likely to top out – which was very few.

There are other features of a market however that can be far more indicative of when the musical chairs might be about to stop. To this end we have compiled a list of signs that in isolation may not indicate that a cryptocurrency bull market is about to top out, but that together can act as very clear indicators, especially when combined with the kind of price action we saw in late 2017 and early 2018.

Read, enjoy…and remember.

Exchanges Registration Backlog

A feature of the peak of the cryptocurrency bull market of 2017/18 was that cryptocurrency exchanges such as Coinbase and Binance were so overwhelmed with new signups that they had to close registrations and open small windows where they could deal with the influx. Many people assumed that this pile of money waiting to come into the market would keep the party going. It didn’t.

They also failed to cope when Bitcoin made big moves, something we have continued to see even today. Exchanges should be able to deal better with the surge of new entrants into the market next time round, but their periods of downtime during heavy trading sessions shows that perhaps their infrastructure still isn’t up to the task.

Mainstream Media Attention

Bitcoin’s rise during 2017 garnered some attention in the press, but only when it crossed $10,000 did the momentum really kick in. The constant coverage that then followed worldwide led to an influx of new people wanting a piece of the action, which drove the price even higher. A now famous article by the New York Times titled Everyone Is Getting Hilariously Rich and You’re Not marked the absolute peak of the 2017/18 cryptocurrency bull market.

The same will happen again with the next cryptocurrency bull market, although for $10,000 in 2017 read $20,000 in 2020/21. After breaking $20,000 the coverage will die down a little, although if the price continues to march higher then the coverage and clamour will increase once more. Look out for articles like the New York Times one to know when the top is near.

You Want a Good Tip…

The famous story that John F Kennedy’s father knew to get out of the stock market in 1929 because his shoeshine boy was giving him stock tips holds true today. In late 2017 you couldn’t move for people talking about Bitcoin and blockchain. Baristas, taxi drivers, waiting staff – you name it, they were buying. This is a clear and definitive sign of a market top: when the people who have never heard of it are buying in, it’s time to get out.

Celebrity Involvement

Some argue that Katy Perry single-handedly crashed the cryptocurrency bull market when she posted a picture on Instagram of her “crypto claws” in January 2018 – fingernails decorated with the symbols of cryptocurrencies. This may be harsh, but it was certainly symbolic, as the market started its collapse very soon after.

Perry wasn’t alone however. A plethora of attention seeking celebrities piggybacked on the crypto craze, from Steven Seagal to Paris Hilton. When the celebs get involved en masse, it is usually a sign that you need to do the opposite.

Transactions Taking Hours

Something that may not be as relevant during the next cryptocurrency bull market, although we have already seen evidence that it might be, is the crashing of certain blockchains and the resultant sky-high processing fees. The Bitcoin and Ethereum networks were not prepared for the onslaught their networks received in 2017, resulting in transactions taking hours and sometimes days rather than minutes, with only the tech-savvy able  to speed their transactions up.

Will things be any different next time round? Bitcoin is fundamentally no different than it was in 2017 so there’s every expectation it will get clogged up when things get too much for it, while the recent DeFi craze has shown that in its current guise Ethereum will falter again. Ethereum 2.0 should be rolled out by the peak of the next cryptocurrency bull market meaning that it will be able to cope a lot better with what will come its way.

The other difference of course is that there will be more coins on the market next time round which will dilute the concentration on Bitcoin and Ethereum, but all eyes will be on these two, and especially Bitcoin, to know when there are so many people trying to get through the front door that it’s time to sneak out the back.

Mastering a Cryptocurrency Bull Market 

This list is not exhaustive, but it should help you get an idea of the emotional state of a market and its participants when a bubble is about to pop. These sorts of signals feature in all bull markets regardless of the asset or commodity, and the next cryptocurrency bull market will be no different. Greed and FOMO will bring in the last 10%, the 10% that end up holding the baby, so it is vital to get out before the hoards start banging at the gates.

There may be other signs of a cryptocurrency bull market topping out that we cannot predict ahead of time, but they will carry the same sentiment as those listed above. It should therefore be pretty clear when the time is right to log in, sell up, and move to the Caribbean rather than dragging your altcoin bags round the budget supermarket for the next two years.