Crypto market cycles are the recurring phases of accumulation, markup, distribution, and markdown that reflect shifting liquidity, sentiment, and supply–demand in digital assets. In practice, you identify bull markets when prices trend up on broad participation and improving risk metrics, and bear markets when prices form persistent lower highs/lows with deteriorating liquidity and risk appetite. This guide is for education, not financial advice; always consider your circumstances and consult a qualified professional before acting on market signals. To move from theory to action, here’s a fast summary of the nine signals you’ll learn to read: price-phase structure; moving averages; momentum regimes; realized value (MVRV); NUPL sentiment; derivatives funding and basis; exchange reserves and flows; cross-asset correlations; and a confluence checklist that ties it all together for objective decisions. Understanding these will help you distinguish noise from cycle turns and act with intention, not impulse.
1. Map the Four Phases: Accumulation, Markup, Distribution, Markdown
Bull or bear is easiest to see when you start with the cycle’s four phases. The accumulation phase follows a large decline and features flat price action, low volatility, and quiet demand as long-horizon buyers slowly absorb supply. Markup begins when higher highs and higher lows emerge and volume broadens; this is the recognizable “bull.” Distribution is the topping process where price churns sideways, volatility rises, and strong hands sell to late entrants. Markdown is the bear: persistent lower highs/lows, rallies that fail at resistance, and negative momentum. Focusing on phase rather than headlines helps you set expectations: in accumulation, risk/reward often improves; in distribution, protecting gains matters more than squeezing the last percent. Treat phases as a map—your next move (accumulate, ride, de-risk, or sit out) should match the terrain you’re in. Investopedia
How to do it
- Draw swing structure on a multi-month chart: mark higher highs/lows or lower highs/lows.
- Note volume expansion or contraction through ranges.
- Watch volatility: compressions often precede breakouts; expansions often follow tops/bottoms.
- Track failed breakouts/breakdowns—two failures in one direction often precede moves the other way.
- Annotate where demand/supply flipped (support/resistance) to spot distribution or accumulation.
Numbers & guardrails
- After deep markdowns, ranges with daily volatility contracting by one-third to one-half versus prior trend often mark early accumulation.
- Two consecutive swing higher highs and higher lows usually confirm markup; the inverse for markdown.
Synthesis: Labeling the phase first keeps you objective and frames every other indicator as confirmation rather than prediction.
2. Confirm the Trend with Moving Averages and Market Structure
To separate durable bulls from noisy rallies, combine structure (higher highs/lows) with moving averages (MAs). A common rule of thumb uses a fast MA (e.g., 50-day) versus a slow MA (e.g., 200-day): crosses and slope filter momentum direction, while price relative to these averages shows where buyers or sellers control risk. Treat MA signals as context, not standalone triggers. In a healthy bull, price holds above rising intermediate MAs on pullbacks, and the fast MA often rides above the slow MA. In a bear, price sustains below falling MAs, and bounces stall into them. Crossovers are coincident-to-lagging, so you won’t catch exact tops/bottoms—but they help you avoid fighting the prevailing trend. Overlay this with simple structure and you’ll filter many false alarms.
How to do it
- Plot 50- and 200-period simple MAs; note slope plus crossovers (“golden cross” vs “death cross”).
- Validate with structure: no uptrend without higher highs/lows.
- Use pullback depth to judge trend health (shallow pullbacks above a rising 50-MA favor bulls).
- Confirm with breadth (more assets above their 50-MA) for stronger signals.
Common mistakes
- Treating a single crossover as a forecast rather than a filter.
- Ignoring slope; a flat 200-MA is indecision, not a green light.
- Using closing prices inconsistently across exchanges or timeframes.
Synthesis: When structure and MAs agree, odds favor the identified regime; when they diverge, stand back or trade smaller until confluence returns. StockCharts Help Center
3. Read Momentum Regimes with RSI (and MACD)
Momentum tells you if trends have fuel. The Relative Strength Index (RSI) is a bounded oscillator (0–100) that gauges the velocity of gains versus losses. In bull regimes, RSI often “range shifts” higher (e.g., pullbacks hold above 40–45 and rallies push into 70–80). In bears, the inverse happens (rallies stall near 55–60, dips probe 20–30). Divergences (price makes a new high while RSI does not, or vice-versa) can flag momentum fatigue, but treat them as early warnings that need trend confirmation. MACD (moving average convergence divergence) adds a second lens by tracking changes in trend speed via EMAs and a signal line. Use momentum to grade setups, not to trade against strong trends just because RSI is “overbought.”
Numbers & guardrails
- RSI above ~60 during consolidations often supports bull continuation; below ~40 in rallies often warns of bear pressure.
- Multiple divergences across timeframes carry more weight than single prints.
- A momentum “range shift” (e.g., RSI floor rising from ~30 to ~40+) is often more informative than one overbought/oversold tag.
Mini case
Suppose price advances 22% while RSI stair-steps from 50 → 62 → 58 → 68, with each dip making a higher RSI low near 55. That “rising floor” often precedes breakouts in bull regimes; the mirror image applies in bears.
Synthesis: Momentum doesn’t predict the exact turn; it grades the quality of the current trend so you don’t fade strength prematurely or overstay weakness.
4. Compare Market Value to Realized Value with MVRV
On-chain data lets you infer investors’ aggregate cost basis. Realized capitalization (realized cap) values each coin at the price when it last moved, approximating what holders “paid,” while market cap reflects the current valuation. The MVRV ratio (market cap ÷ realized cap) contextualizes whether the market trades above or below this aggregate cost. Sustained readings well above 1 imply many holders sit on unrealized profits—conditions that can accompany late-cycle risk if extremes persist. Readings near or below 1 suggest capitulation or undervaluation zones where future returns often improve. Use MVRV as a cyclical gauge, not as a timing tool; extremes can persist in powerful trends. Combine it with price structure and momentum for confirmation.
Tools/Examples
- Realized cap & MVRV dashboards from reputable providers (e.g., Glassnode, Coin Metrics).
- Entity-adjusted variants reduce noise from intra-exchange movements.
- STH-MVRV focuses on short-term holders to see if “recent buyers” are under water or in profit.
Numbers & guardrails
- MVRV > 1 = average coin sits in profit; MVRV < 1 = average coin sits near or below cost basis.
- Short-term holder MVRV clustering around ~1 often acts as a “fair value” gravity zone during transitions.
Synthesis: MVRV reframes price against the crowd’s cost basis; use it to judge if a rally is broadly profitable (late-cycle risk) or if losses are widespread (early-cycle opportunity).
5. Translate Crowd P&L into Sentiment with NUPL
Net Unrealized Profit/Loss (NUPL) takes market cap minus realized cap, divided by market cap, to estimate the market’s “paper profits” or “paper losses.” Positive NUPL means aggregate unrealized profit; negative NUPL means aggregate unrealized loss. When NUPL rises into elevated zones, many holders have incentive to take profits; when it sinks deeply negative, capitulation and value buying can emerge. Treat NUPL’s level and trend as sentiment thermometers: rapidly rising NUPL often precedes distribution as gains tempt supply onto the market, while deeply negative NUPL aligns with late bear pain. Use trend changes—peaks rolling over or troughs curling up—as early regime flags.
Numbers & guardrails
- NUPL > 0 indicates more profit than loss; < 0 indicates more loss than profit.
- Vendor guides commonly flag zones such as ~0.7+ as riskier (euphoria) and ≤ −0.2 as washed-out (capitulation). Treat these as context, not trade signals.
Mini case
Imagine NUPL climbs from 0.35 → 0.55 while price rallies and exchange reserves rise. That combination (rising paper gains plus more coins on exchanges) often foreshadows distribution risk. In contrast, NUPL at −0.15 improving toward 0 with falling exchange balances often accompanies bottom building.
Synthesis: NUPL compresses the market’s emotional state into a ratio you can track; use extreme zones and inflections to frame bull-versus-bear probabilities.
6. Watch Derivatives: Funding, Open Interest, and Basis
Perpetual futures have no expiry, so exchanges use funding rates—periodic payments between longs and shorts—to tether contract prices to spot. Persistently positive funding means longs pay shorts and can indicate excessive bullishness; persistently negative funding signals the opposite. Add open interest (OI) to gauge leverage buildup and term basis (futures versus spot): steep contango can reflect bullish positioning, while backwardation often arrives in stressed markets. None of these predict turns alone, but extremes plus a shift in price structure often precede regime changes as crowded traders unwind. Track the direction, persistence, and interaction of these metrics rather than single prints.
How to do it
- Log funding rates across major venues; note streaks (e.g., multiple intervals positive or negative).
- Pair funding with OI: rising OI + rising price + strongly positive funding = crowded longs; the mirror for crowded shorts.
- Check basis on dated futures: unusually high annualized basis can indicate froth; negative basis often aligns with fear.
Numbers & guardrails
- A simple guardrail: when funding stays elevated for multiple consecutive intervals and OI grows rapidly, tighten risk; if funding flips negative while price holds higher lows, that’s often bull fuel as shorts pay to fade strength.
Synthesis: Derivatives metrics reveal who’s paying to hold risk; when prices shift against a crowded side, bulls or bears often take the baton.
7. Track Liquidity with Exchange Reserves and Flows
Exchange balances and flows provide a view of potential sell-side supply. Rising exchange reserves suggest more coins are available to sell; declining reserves imply more self-custody and reduced immediate supply. Net inflows over short windows can front-run spikes in realized volatility, while sustained outflows can accompany accumulation. These datasets are built by labeling exchange addresses and aggregating balances; the methodology differs across vendors, so focus on direction and persistence, not exact numbers. Pair flows with price and on-chain profit metrics: profits rising and reserves rising can foreshadow distribution; losses rising and reserves falling can signal bottom formation as holders step away from exchanges.
How to do it
- Monitor total reserves across major exchanges plus netflow (in minus out) over daily/weekly windows.
- Cross-check with at least two vendors to reduce data idiosyncrasies.
- Combine with NUPL/MVRV to see if profitable supply is moving toward exchanges.
Numbers & guardrails
- Methodologies vary; expect absolute-level differences by provider. Directional agreement across sources is the key signal to respect. Contentful
Synthesis: Liquidity flows don’t call tops or bottoms, but they show where potential sell pressure sits; align them with profit metrics to refine bull-versus-bear reads.
8. Use Cross-Asset Correlations to Contextualize Crypto Risk
Crypto doesn’t trade in a vacuum. Correlations with global equities, liquidity conditions, and the macro policy backdrop wax and wane with who’s participating in the market. When institutional participation grows, correlations with broad equity benchmarks typically strengthen; when retail drives flows, idiosyncratic behavior can increase. You don’t need to predict policy or macro; you need to notice when crypto starts moving with or against major risk proxies and adjust expectations for trend durability, whipsaw risk, and diversification. Correlation shifts don’t declare a bull or bear alone, but they set the regime in which your other signals will behave.
How to do it
- Track rolling correlations between your crypto asset and a major equity index or risk proxy.
- Note regime shifts (e.g., correlation moving from near zero to persistently positive or negative).
- When correlations tighten, expect macro headlines to amplify crypto moves; when they loosen, crypto-specific flows matter more.
Mini case
If correlation rises from ~0.1 to ~0.6 over several weeks while equities trend higher and your coin’s funding turns positive, a risk-on macro plus crowded longs raises bull continuation odds—but also drawdown risk if equities wobble.
Synthesis: Correlations explain the why behind certain trend behaviors; use them to set expectations for volatility, momentum follow-through, and hedging.
9. Build a Confluence Checklist (and Stick to It)
The most reliable way to identify bull versus bear is to require multiple independent signals to agree before you change your stance. Create a written checklist that blends price action, on-chain, and derivatives. Decide your minimum evidence (e.g., four of six checks) and how you’ll size up or down. The goal isn’t to predict the exact turn; it’s to avoid fighting the tape and to re-risk only when the wind’s at your back. Confluence also helps you prevent indicator “overfitting”: if one tool flashes a warning but the others don’t, you can wait for either confirmation or resolution. Over time, the checklist improves your discipline and makes your process repeatable, regardless of narrative noise.
A compact, practical checklist
| Indicator | Bull reading | Bear reading |
|---|---|---|
| Phase & structure | Higher highs/lows; strong breakouts hold | Lower highs/lows; breakouts fail |
| MAs | Price above rising 50/200; golden cross holds | Price below falling 50/200; rallies sold into |
| RSI/momentum | RSI “range shift” high; pullbacks hold 40–50 | RSI capped near 55–60; dips probe 20–30 |
| MVRV/NUPL | MVRV near/above 1 but not extreme; NUPL rising from low | MVRV < 1 or extreme euphoria; NUPL rolling over from high |
| Derivatives | Funding stable/neutral; OI grows with pullbacks absorbed | Funding persistently one-sided; OI spikes into reversals |
| Exchange reserves | Flat/down with price strength | Rising with price strength (distribution risk) |
Mini case
Assume you require 4 of 6 checks. You see: markup structure, rising 50/200-MA with price above both, RSI holding ~45–50 on dips, and NUPL lifting from negative toward zero while exchange reserves fall. That’s four bullish checks even if funding oscillates. You scale in; if two checks flip bear (e.g., structure breaks and reserves rise), you de-risk automatically.
Synthesis: Confluence beats conviction. A small, objective checklist helps you label regimes consistently and act in alignment with the prevailing cycle.
Conclusion
Identifying bull and bear markets in crypto is less about finding a single “magic” indicator and more about arranging an ensemble of independent signals into a coherent thesis. Start by labeling the phase: accumulation, markup, distribution, or markdown. Confirm or challenge that label with structure and moving averages, then grade it using momentum range shifts. Contextualize valuation with on-chain metrics like realized cap, MVRV, and NUPL, and layer in derivatives cues such as funding, open interest, and basis to see how levered traders are leaning. Add liquidity context from exchange reserves and pay attention to cross-asset correlations so you understand when macro winds are at your back—or in your face. Finally, codify everything in a brief checklist. The process won’t nail the penny top or bottom, but it will help you avoid the middle mistakes that cost the most. When your checklist aligns, act; when it diverges, slow down. Ready to put it to work? Pick one asset, apply the nine signals, and write your plan before your next trade.
FAQs
1) What’s the simplest way to tell if a bull market has started?
Look for a sequence of higher highs and higher lows, price reclaiming and holding above key moving averages, and improving momentum (RSI floors rising). Add one on-chain confirmation like MVRV moving back toward or above 1 without extreme euphoria. When four or more independent checks agree, you have a working bull thesis—then manage risk around it.
2) How do I avoid buying the top in a euphoric rally?
Track sentiment-adjacent metrics like NUPL and watch exchange reserves. When unrealized profits are high and more coins move onto exchanges, distribution risk grows. Pair that with momentum divergences or failed breakouts to wait for better entries or to take partial profits.
3) Does a “golden cross” guarantee a bull market?
No. Crossovers are coincident-to-lagging filters that help you avoid fighting the existing trend, but they fail in choppy ranges. Require additional confirmation—structure, momentum range shifts, and at least one on-chain or derivatives signal—before changing your stance.
4) Are RSI overbought/oversold levels reliable in crypto?
Treat classic 70/30 tags as context. In strong bulls, RSI can stay elevated for extended periods, and in bears it can stay depressed. The more useful read is the range where RSI spends most of its time (e.g., 40–80 in bulls versus 20–60 in bears) and whether that range is shifting.
5) What’s the difference between MVRV and NUPL?
Both compare market value to realized value derived from last on-chain movement. MVRV is a ratio (market ÷ realized), while NUPL normalizes the profit/loss gap by market cap. Use MVRV to gauge valuation relative to cost basis and NUPL to estimate unrealized profits/losses and sentiment.
6) How should I read funding rates?
Funding rates show who’s paying to hold perpetual futures. Persistently positive funding suggests crowded longs; persistently negative indicates crowded shorts. The edge comes when funding is one-sided and price action turns against that crowd—forced unwinds can amplify moves.
7) Do falling exchange reserves always mean price will go up?
No. They often align with accumulation, but price can still fall if macro forces overwhelm crypto-native flows. Use reserves as one puzzle piece alongside structure, momentum, and on-chain profit metrics rather than a standalone signal. userguide.cryptoquant.com
8) Are these signals different for altcoins versus Bitcoin?
Mechanics are similar, but altcoins can exhibit higher volatility, thinner liquidity, and more idiosyncratic flows. On-chain coverage is also spottier outside major networks. Lean more on price structure, MAs, momentum, and derivatives for thinly covered assets, and be more conservative with position sizing. (Opinion)
9) How many signals should I require before acting?
Four out of six or five out of seven is a practical starting point. The point is consistency: pre-define your threshold, then follow it. Increase the threshold in choppy ranges and reduce it when confluence is unusually strong across domains. (Opinion)
10) Can I use these methods on intraday charts?
Yes, but short timeframes are noisier. Indicators like MVRV/NUPL are higher-timeframe by design; for intraday, rely more on structure, shorter MAs, momentum, and derivatives metrics like funding and OI. Use higher-timeframe context to avoid trading against the dominant regime.
References
- MVRV Ratio. Glassnode Docs. Publication date: Dec 24, 2024. docs.glassnode.com
- Realized Capitalization. Glassnode Docs. Publication date: Dec 27, 2024. docs.glassnode.com
- Introducing Realized Capitalization. Coin Metrics. Publication date: Dec 14, 2018. Coin Metrics
- MVRV & SOPR: Insight into Investor Sentiment. CoinDesk Research. Publication date: Sep 20, 2020. downloads.coindesk.com
- Net Unrealized Profit and Loss (NUPL). CryptoQuant User Guide. (Undated page) https://userguide.cryptoquant.com/cryptoquant-metrics/utxo/net-unrealized-profit-and-loss-nupl userguide.cryptoquant.com
- What Are Funding Rates in Crypto Markets? Binance Academy. Publication date: Aug 8, 2024. Binance
- Understanding Perpetual Futures. Investopedia. Publication date: undated. Investopedia
- Arthur Hill on Moving Average Crossovers. StockCharts ChartSchool. Publication date: Jun 3, 2024. ChartSchool
- Relative Strength Index. Wikipedia. Last updated periodically. Wikipedia
- The Psychology of Market Cycles. Binance Academy. Updated. Binance
- Understanding Market Cycles: Phases, Functionality, and Types. Investopedia. Publication date: undated. Investopedia
- The Crypto Cycle and Institutional Investors. Working paper by Copestake, Furceri, Terracciano. Publication date: Sep 2024. Alexander Copestake
- Exchange Metrics: Transparency Notice. Glassnode Docs. Publication date: Dec 5, 2023. docs.glassnode.com
- Bitcoin On-Chain Exchange Metrics: The Good, The Bad, and the Ugly. Glassnode Insights. Publication date: Apr 22, 2021. Glassnode Insights
