Crypto bull runs work like this.
Crypto bull runs typically unfold in phases:
1. Accumulation Phase: After a market correction or bear phase, large investors (often called "whales") and savvy traders start accumulating assets at lower prices. During this phase, prices stabilize, and trading volume is often low as public interest is minimal.
2. Early Rally Phase: As buying pressure builds, prices start to increase. This rise may go largely unnoticed at first, but early indicators like technical breakouts, volume spikes, or strong support zones signal a potential uptrend. Experienced traders and analysts may catch on here and enter positions.
3. Public Participation Phase: Once price gains become noticeable, retail traders and mainstream media start covering the rise. This creates a snowball effect of FOMO (fear of missing out) that attracts more people into the market. Prices surge quickly as more buyers enter, leading to a sharp upward trend.
4. Euphoria Phase: At this point, prices reach new highs, and sentiment becomes overwhelmingly positive. Media hype, speculative investments, and retail FOMO are at their peak. Many new and inexperienced traders jump in, convinced the prices will keep going up indefinitely. This phase usually features sharp, parabolic gains.
5. Distribution Phase: Smart investors and whales may start selling their assets to lock in profits. As they distribute their holdings, prices begin to stabilize or pull back. Signs of divergence, weaker volume, and failed attempts to reach new highs may appear. However, retail traders often don't notice these signals and keep buying.
6. Downtrend and Correction: Eventually, the supply from selling pressure overcomes demand, and prices begin to fall sharply. Panic selling ensues as fear replaces FOMO, leading to a sharp decline. This correction can erase a large portion of gains and lead back into a bear market or consolidation period, setting up for the cycle to start again.
Crypto bull runs can be intense and fast, driven by both market fundamentals and emotional swings among traders. Monitoring these phases, using technical indicators, and managing risk are essential for making the most of a bull run.