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Earlier this month, we wrote about why market cycles exist (if you missed it, read on here).
Today, we’re diving into understanding the hype part of the cycle (the top) and looking at various indicators that can help us understand when we are nearing the top.
Hype cycles across any asset class almost always work the same. You can match chart patterns across crypto, tech, real estate and even tulip bubbles from the 1600’s.
This happens because of human psychology. Humans are innately greedy and always want more. Thus, whenever we see others making money, we want to make some too… even if it’s a tulip.
There’s a very popular chart on Wall Street that outlines the psychology of a market cycle…
The gist of it is that we become the most confident and invested during the riskiest of times (the top) and the most scared and least invested during the least riskiest times (the bottom).
These psychological attributes of markets are what drive new investors, mainly retail, into markets near the top of every market cycle.
The interesting thing about the crypto asset class however is that because it’s so easily accessible to anyone in the world, it attracts retail more than any other asset class.
This isn’t true for real estate or other more expensive / globally restricted assets, whereas crypto is global and can be bought in tiny pieces (even for $1 or less).
While institutions and professionals struggle with the psychology of markets too, it's more consistent with retail investors.
With each crypto cycle that passes, we witness the same thing with retail investors… Once mainstream retail investors realize that people are making money in crypto, they flood into the market with ease, just like what happened in 2017 and 2021.
After the music stops and the prices head back down, they leave with their heads low and their investing accounts even lower. 😢
And that brings us to the opportunity of today. For the last 1.5 years, retail investors have completely left the crypto market. During bear markets and early stages of bull markets, mainstream retail investors are nowhere to be seen. They don’t invest in crypto, they don’t care about it and rarely think about it.
Just think about your non-crypto friends and family members. Do they care about crypto right now? No. Did they buy it in 2021 though? Probably, yes!
And just like every cycle previously, they will come back with vengeance this time too.
As educated investors in crypto that are here well before the masses, one simple thing we can do to understand these cycles is to watch for when mainstream retail enters the market.
At that point, it’s time for us to start trying to identify the top and think about taking profits. Our goal is to be allocated way before the mainstream gets here (if you’ve been following PRO reports then you should already have achieved this) and then dollar cost average out as they pile in (if you want to take profits).
So how do we know when retail investors are here? Well, that’s what we are going to cover in today's PRO report.
We’re going to look at various indicators that you can track to understand who is entering the market. Most of these numbers are not onchain, but instead looking at more unique indicators like:
Social media views and subscribers for crypto channels
Active users on centralized exchanges and onchain
Crypto app downloads on Apple and Google
Short term vs. long term holders
Google search trends
Social cues
Let’s dive in. ⏬
Crypto Social Metrics 🤳
The first thing to understand about retail investors is that they get their investing information from social media, not institutional reports.
This means we can gain a lot of information from social platforms.
As you’ll see from the charts below, retail tends to enter the market late in the cycle and then leave the bear market late too. They buy the top and sell the bottom. Exactly what you don’t want to do!
Below is the growth in our podcast downloads throughout the bear market. We launched in March 2022 (tail end of the bull market) and managed to grow significantly, even though prices topped out back in November 2021.
But look at where our growth stopped – November 2022, the exact bottom of the crypto bear market.
Even though Bitcoin went up more than 150% in 2023, we continued to see a decline until November 2023, when Bitcoin was back above $40k.
Our marketing agency Impact3 works with various crypto media companies and the numbers are the same across the board.
Here are the YouTube channel views of one of the largest crypto influencers in the space. It just started to see views pick up in November 2023 as well.
But while it looks like it's picking up, it's still nowhere near previous cycles numbers.
One thing to note is that this comparison is also very inflated during this current cycle as this channel is now using shorts (< 60 sec vids) on YouTube, whereas YouTube didn’t have this last cycle.
Shorts allow for a lot more videos to be posted than usual on a channel, so the view numbers will be significantly higher than last cycle when mainstream comes back.
A better comparison is YouTube subscribers. During the bear market this channel actually saw a decrease in subscribers each day until Q4 2023. Now, we are just beginning to see the subscriber count pick up.
But compare this to the last cycle and it looks like nothing is happening…
This tells us we are nowhere near the top of the cycle and mainstream is not flooding back into crypto just yet (...though it’s beginning). 👀
An indicator that anyone can take a look at is Google Trends, a free website to track what people are searching around the world.
During the 2 previous cycles, searches for Bitcoin went parabolic. This has not yet happened this cycle. Though, once again it is beginning to pick up.
One thing to note is that Bitcoin appears to be less and less relevant after each cycle in terms of search. If we use terms like crypto or Ethereum, we can see that these terms actually grew from one cycle to the next.
As you can see below, neither have mounted much of a comeback yet this cycle.
A newer term that came out of the last cycle was web3. It shot up considerably near the tail end of last cycle and also hasn’t seen a huge resurgence yet…
Retail Crypto Apps 📲
When retail returns to crypto, what is one of the first things they need to do?
Download crypto applications. Whether that be centralized exchanges, price tracking apps or wallets, newbies coming into crypto need to get their apps set up (or redownload the apps they deleted from last cycle).
In the last cycle crypto apps topped the app store in the US at the #1 spot for weeks. We’ve only just hit the top 20 in the last week.
In the finance category on the App Store, we’re still seeing little growth here, which shows that investors are more interested in tech stocks than crypto at the moment.
This makes sense considering the NASDAQ and S&P 500 are already past previous all time highs.
Remember, mainstream retail investors buy the top and sell the bottom. So it’s very likely that these investors don’t come back into crypto until we surpass or get close to all time highs.
One caveat to the above charts is that maybe everyone in the US already has the apps downloaded on their phones, so that’s why it’s not seeing a spike. But, I don't buy this, as many need to re-download or download newer apps (since many of the last cycle companies collapsed in the last 2 years).
But either way, we can look at active users on Coinbase since they are a publicly traded company and need to disclose these numbers.
We can see that Coinbase has seen a continuous decline in active users throughout 2023 and only in Q4, 2023 began to see a small increase in user activity.
With the latest quarterly Coinbase earnings released last week, we also have up-to-date numbers on retail trading volumes.
After putting in a low in Q3, 2023, we’re beginning to see a pick up in volumes in Q4, 2023 as well as extrapolated volumes for Q1, 2024.
Keep in mind, this doesn’t mean that mainstream retail investors are back, these volumes are up because the prices of the traded assets are up 100%+ since the lows, however it’s definitely a signal that retail trading is picking up.
It appears we still have plenty of room to go in this cycle according to the above data too! Let's move onchain to see if we can uncover anything else…
Onchain Indicators 📊
Moving away from the application numbers and instead looking onchain, Bitcoin HODL waves is one of the best indicators for retail investors and showing where we are in the bull market.
HODL waves group Bitcoin wallets by how long they have held their $BTC for. Retail investors enter and leave markets quickly, generally buying and selling tokens on a short term basis.
Whereas institutions and crypto natives that have stuck around during the bear market will have tokens in their wallets that they haven’t sold for many months or years.
Just by looking at the chart below you can see where the tops of each crypto cycle were and when retail flooded into the market.
The moment that the dark red and orange colors on this chart go parabolic is the moment you want to start thinking about taking profits.
Once again, we are nowhere near those levels yet.
Just like we tend to see high levels of downloads on crypto apps near the top of the cycle, we also see onchain users spike near the top.
You can see Bitcoin’s active users went parabolic at the exact top in 2017 and 2021.While active users have been increasing in 2023, this can mainly be attributed to Ordinals, a new innovation on top of Bitcoin in 2023.
There’s plenty of room to go before this turns parabolic from retail buyers.
On Ethereum, we see the same trend, as retail investors learn about what's possible onchain and start to move down the risk curve, buying shitcoins and using leverage, which they otherwise can’t access on centralized apps.
Again, plenty of room to go here, though this chart may look different moving forward since most of the onchain activity is being moved to Layer 2s and other chains.
One final thing to note on the above charts is that this metric may no longer be useful after this cycle. As you can see, after each cycle, the dip in active users lessens.
This happens because after each cycle there are more applications and things to do onchain, so people stick around.
If this is the cycle that we onboard the masses with non-speculative use cases like games and stablecoins, we may not see a significant dip in active users even if we see a dip in prices.
Sometimes, we don’t even need to look at a chart to get a signal that we are nearing the top.
Sometimes, it’s best to just pay attention to how things are changing in your day to day life…
PRO Tip For Top Signals 🚨
The charts and indicators above are all extremely helpful to understand when we are reaching the top.
I recommend you use as many of these as you can to gauge the best time to take profits.
Outside of tangible charts, there are also plenty of social cues that you can be aware of in your day to day life. I will list a few of them below, but when you notice many of these happening, I can assure you that most of the charts above will be going parabolic (as will the prices of crypto).
Here’s a quick list of social cues that may be signaling the top is near:
Your friends or parents start texting you about investing in crypto. When they start asking about specific tokens you’ve never heard, it’s getting real close.
Uber drivers start shilling crypto to you.
The mainstream media starts talking about crypto on a daily basis, especially when they talk about things outside of Bitcoin or Ethereum.
Crypto becomes a popular subject on Saturday Night Live, Late Night talk shows or other mainstream TV.
Celebrities start shilling tokens on their social media accounts.
The Super Bowl is filled with Crypto commercials. Notice there were 0 crypto commercials in the 2024 Super Bowl. There were more than 5 in 2021 and then just 2 in 2022.
Crypto is a popular topic on Facebook and Instagram (it always remains relevant on Twitter and Reddit).
People start sharing pictures of tattoos with names and logos of crypto tokens.
I’m sure there are many more, but this is a great list to get you started.
Of course, there are other forms of analysis that can help you understand when we are nearing the top, but these social cues and retail investor trends are a great starting point.
Use these, among other data points, to help you make the best investing decisions this cycle. For more information regarding when to sell this cycle, check out my “when to sell plan” article.
This will take a lot of the noise of markets out of your investing strategy and simplify things.
In other words, it’ll ensure you don’t F this opportunity up, because this might be the last big cycle when generational wealth is made.
To dive deeper into the fundamentals of crypto investing, scroll down & learn more about our Web3 Investing Masterclass – PROs get 50% & Founders get it for FREE!
Thanks for reading. And remember, you're strong, you’re powerful, you’re alpha! ❤️
How'd you feel about our read today?
ABOUT THE AUTHOR
Kyle Reidhead
Founder of Web3 Academy and Impact3
Find him on Twitter
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Disclaimer: This article is for informational purposes only and not financial advice. Conduct your own research and consult a financial advisor before making investment decisions or taking any action based on the content.
