What Should We Pay Attention to This Time Based on Early Experiences from Historical Bull Market Cycles?

By analyzing past cryptocurrency bull market cycles, we can break down the mid-cycle initiation signals, discern their authenticity based on the current market situation, and outline key observation indicators and potential trading risks.

Written by: JamesX

After every major surge, the market often hears a dangerous phrase: "This time it has been confirmed as a bull market." The problem is that the term "bull market" conflates oversold rebounds, trend recoveries, capital expansions, and late-stage bubbles. All of these can rise consecutively, but the quality of the buying behind them, leverage, and risk-reward ratios are entirely different.

The "earliest initiation of a mid-cycle bull market" should have verifiable definitions: prices stabilize above the main cost zone; new capital continuously enters spot markets, ETFs, and stablecoins; long-term holders cash out in an orderly manner but do not fully distribute; Bitcoin breaks out first, followed by an expansion in market breadth; leverage increases but does not dominate prices. Only when multiple conditions resonate can we distinguish it from a rebound caused by short covering.

1. Historical "Mid-Cycle Initiation" Typically Goes Through Four States

The 2016-2017 cycle provided a typical template. About 525 days after the second halving, the cycle peak appeared, but what was truly important was the breakthrough of old highs, capital inflows, and the transfer of chips, culminating in the final ICO frenzy. According to CoinGecko data, Bitcoin's market share approached 38% by early 2018. A healthy mid-cycle expansion is often first established by BTC's credibility, followed by ETH and high-risk assets taking over; if only low liquidity small coins surge at the beginning, it resembles localized speculation.

The structure of the 2020-2021 cycle was even clearer. After the pandemic shock, Bitcoin first completed its chip accumulation and then broke through the pre-2017 highs; stablecoins, institutional allocations, and derivative infrastructure collectively amplified capital carrying capacity. Glassnode's review shows that from November 2020 to May 2021, long-term holders cumulatively distributed about 394,000 BTC, with a peak monthly distribution rate of about 150,000 BTC. In other words, a mid-cycle bull market does not require "old players not to sell"; on the contrary, old chips begin to take profits, but new demand is sufficient to absorb the supply, marking the strongest phase of the trend.

Halving improves new supply but cannot create demand. Fidelity statistics show that the peaks after the halvings in 2016 and 2020 were about a year and a half later, but the return rates decreased; the market cap/realized cap multiples during the 2017 and 2021 cycles were close to 4, while the 2024-2025 cycle is expected to be around 2 to 3 for most of the time. The four-year cycle can serve as a backdrop but should not become an exact calendar.

2. The Earliest Signs of Mid-Cycle Bull Market Initiation Typically Have Seven Distinct Characteristics

First, prices complete a "breakout - retest - stabilize again" pattern, rather than just showing a single large bullish candle. True trend confirmation requires weekly levels to break away from long-term consolidation zones, with reduced volume during retests and exhausted selling pressure, followed by renewed volume. If prices quickly fall back into the original range after a breakout, it is usually a liquidity trap or short squeeze, not a new trend.

Second, spot demand is stronger than contract demand. During mid-cycle initiation, trading volume will increase, but more importantly, spot transactions, spot CVD, ETF subscriptions, and on-chain capital inflows should all improve simultaneously. If price increases mainly come from perpetual contracts, with open interest rapidly increasing while spot volume does not keep up, the market will become very fragile: even a slight pullback could trigger a cascade of long liquidations.

Third, realized market cap begins to accelerate. Realized market cap is valued at the price of the last on-chain movement of each BTC, more closely reflecting the capital cost of entering the network. Glassnode points out that during the bull market expansion phase, realized market cap will steeply rise; after breaking historical highs, long-term holders take profits, and new buyers take over at a higher cost, thus driving the revaluation of realized market cap. If prices rise while realized market cap stagnates, it indicates that the increase may lack sufficient new capital support.

Fourth, short-term holders shift from losses to profits but are not yet overly euphoric. Prices standing above their cost lines and SOPR returning above 1 mean that recent buyers are no longer generally cutting losses; if MVRV enters historical extremes and almost all chips are profitable, it resembles distribution. In Glassnode's long-term holder MVRV framework, below 1 corresponds to losses, 1 to 1.5 leans towards bear-bull transitions, 1.5 to 3.5 indicates balanced expansion, and above 3.5 enters a strong profit-taking motivation zone. The thresholds should not be mechanically copied; state transitions are more important.

Fifth, stablecoin supply continues to expand. A positive net issuance over 30 days typically represents new on-chain dollar liquidity. However, stablecoins also serve payment and settlement functions, and an increase in supply does not mean all funds will buy coins; if supply does not increase but trading volume surges, it may just be turnover of existing stock or high-leverage trading.

Sixth, market breadth expands sequentially. A healthier path usually sees BTC strengthen first, ETH/BTC strengthen next, mainstream assets expand, and finally small-cap coins follow. One can observe the BTC market share, ETH/BTC, and the proportion of the top 100 assets above their 50-day moving averages. Only when the index rises while the vast majority of assets hit new lows is it not a comprehensive bull market.

Seventh, pullbacks remain severe, but recovery speeds up. Historical data compiled by Fidelity shows that the 2015-2017 bull market often experienced pullbacks of about 20%, while the 2018-2021 upward cycle even included about 50% and 60% deep declines. A bull market is not synonymous with low volatility; the real distinction is whether key cost zones can be quickly reclaimed after being breached and whether long-term funds are absorbing chips or retreating during declines.

3. Applying These Characteristics to Recent Market Conditions

As of August 23, 2026, different pricing sources show BTC around $76,500 to $77,100. It previously dipped to nearly $58,000 to $60,000 in June and remained around $62,600 in early August; from August 19 to 21, it surged rapidly, peaking close to $79,500, with a cumulative closing price increase of about 18% over three days. This is a strong trend recovery but is still insufficient to independently prove that "the new mid-cycle bull market has already started."

Evidence supporting the bulls primarily comes from ETFs. Farside data shows that from August 17 to 21, the U.S. spot Bitcoin ETF saw a net inflow of about $1.918 billion over five consecutive days, with approximately $517 million and $606 million on the 19th and 20th, respectively. The rise is supported by real capital channels and is not solely reliant on contracts.

However, confirmation signals remain incomplete. DefiLlama's snapshot on August 23 shows that the total market cap of stablecoins is about $303.1 billion, with a seven-day growth of about 0.79% and a 30-day growth of only 0.03%. This indicates that short-term liquidity has improved, but there has not yet been a sustained broad expansion for several weeks.

On the other hand, CoinGlass showed on the same day that BTC futures had a 24-hour trading volume of about $53.05 billion, spot trading of about $4.2 billion, and open interest of about $54.94 billion. Different platforms may have varying coverage, but the fact that "derivative activity is far higher than spot" itself is enough to indicate: there are still crowding and liquidation risks during the upward process.

Market breadth also needs continued verification. Recent snapshots from CoinGecko show BTC's market share still around 56.7%, not exhibiting the state of capital fully overflowing as seen at the end of 2017. A high BTC dominance may mean that institutional funds are still concentrated in the highest quality assets, or it may indicate that most altcoins have not yet received real incremental funds. Therefore, a more accurate statement currently is: the market is transitioning from bottom recovery to an "attempted expansion" phase, with bullish evidence significantly strengthening but not yet completing the quadruple confirmation of stablecoins, spot volume, on-chain capital, and market breadth.

We must also consider the historical trapped positions above the price. In May 2026, Glassnode pointed out that when BTC rebounded above $80,000, the realized market cap saw a net increase of about $2.8 billion over 30 days, still significantly below the levels of over $10 billion per month during past bull market expansion phases, viewing around $86,000 as an important supply zone. Although these values are from the May snapshot and cannot be directly treated as today's precise support and resistance, they indicate that the $77,000 to $82,000 range is merely a return to the old trading zone, and there is still distance to truly digest higher-cost chips.

4. Key Indicators to Watch Over the Next Four to Eight Weeks

The first group is price structure: observe whether the weekly line can stabilize in the new cost zone of $73,000 to $77,000, and whether it can break through and hold the previous high supply zone of $79,500 to $82,000. If it breaks through and then falls back into the original range for two consecutive weeks, it should be treated as a false breakout rather than continuously lowering one's stop-loss standards.

The second group is incremental capital: simultaneously track the five-day and twenty-day net flows of ETFs, the 30-day net issuance of stablecoins, and the 30-day changes in realized market cap. The resonance of all three is what constitutes high-quality expansion; if only ETFs are strong, it may still be a BTC single-point market.

The third group is leverage temperature: focus on the growth rate of open interest relative to market cap and spot volume, the duration of positive funding rates, quarterly contract basis, options skew, and liquidation scale. The danger is not a high rate on a particular day, but rather price stagnation, continued accumulation of open interest, and declining spot transactions—this usually means the next volatility will be amplified by forced liquidations.

The fourth group is chip behavior: during price pullbacks, can STH-SOPR stabilize around 1, is the distribution of long-term holders orderly, and is there a sudden increase in net inflows to exchanges? If old chips flow into exchanges and profit-taking surges while new capital does not increase in tandem, the bull market narrative may be serving to exit liquidity.

The fifth group is market breadth and fundamentals: observe whether ETH/BTC can form an upward trend, and whether mainstream assets have income, users, and real trading volume to support them. New coins should also check circulating market cap, FDV, upcoming unlocks in the next 90 days, and on-chain liquidity. A sector may rise, but it does not mean every similar token will rise.

5. Eight Types of Risks to Guard Against at This Stage

First is the false breakout risk. Rapid increases may simultaneously include ETF buying, short covering, and chasing leverage; as long as spot demand is insufficient afterward, prices will fall back into the range.

Second is the leverage liquidation risk. Do not use "this is a bull market" as a reason to increase leverage. A 20% normal pullback is enough to clear most high-leverage positions; even if the long-term judgment is ultimately correct, one may still be forced to exit first.

Third is the liquidity mismatch of altcoins. Many tokens may seem to have small market caps but actually have even smaller trading depths; they are easy to buy during uptrends but may penetrate multiple price levels when selling during downturns.

Fourth is the unlocking and high FDV risk. Improvements in project fundamentals do not equate to improvements in token supply and demand. Releases from teams, investors, and ecosystem incentives may long-term offset new buying.

Fifth is the yield trap. High stablecoin, staking, or LP yields often come from token subsidies, leverage cycles, or risks of decoupling and smart contracts, and should not be treated as risk-free interest.

Sixth is the reverse risk of institutional funds. ETFs are powerful marginal buyers but may also become transparent and continuous selling channels; one should not only count cumulative holdings but also ignore directional changes in five-day and twenty-day flows.

Seventh is the regression of macro correlation. The dollar, real interest rates, tech stock volatility, credit spreads, and regulatory changes will still affect global risk appetite. The cryptocurrency market trades 24 hours, often amplifying shocks in thin weekend liquidity.

Eighth is the failure of cycle models. Historically, there are few fully comparable mature bull and bear cycles, and the participation structure has changed due to ETFs, corporate treasuries, options markets, and regulatory frameworks. Any conclusion that "prices must rise in a certain month after halving" should be viewed as a narrative, not a risk control rule.

Conclusion: Confirm Capital First, Then Discuss Dreams

The current market is already more positive than from June to early August: prices are rapidly recovering lost ground, ETFs are seeing continuous net inflows, and short-term stablecoin supply has also rebounded. However, the depth of spot trading, accelerating realized market cap, 30-day expansion of stablecoins, and the breadth of the altcoin market still need further confirmation. Therefore, defining the present as a "candidate window for mid-cycle bull market initiation" is more responsible than directly announcing a "comprehensive main rising wave."

The strategy most suitable for this stage is not to chase every narrative with full positions but to layer positions: core positions focus on high liquidity assets like BTC and ETH; tactical positions wait for breakout retests and capital flow confirmations; high-risk altcoin positions limit single project losses; leverage should be used sparingly or not at all; and conditions for failure and phased profit-taking rules should be written down in advance, while maintaining a cash buffer capable of withstanding a 20% to 30% pullback.

The greatest risk in the early stages of a bull market is often not "rising too quickly," but rather that investors believe too early that they have understood the cycle. Prices can create confidence, but only sustained spot buying, capital inflows, and healthy chip exchanges can turn that confidence into a trend.

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