Introduction
Ever wondered how to spot the top of a bull market? The point just before a major move downwards as Bitcoin enters a long bear market? Unfortunately, I can’t help you there. But, I can guide you through the past to identify the 4 symptoms of a dying bull market. Hopefully this is a helpful set of criteria that make you a better investor. We will use a green, yellow, red system to identify symptoms that are unhealthy (shows signs of a top) and those that are healthy (signs of a sustained bull market).
This is important as Bitcoiners because it can help us HODL more effectively and maybe hold off on a lump sum purchase to “enjoy” the hodling experience even more. Even if you’re holding for multiple decades, it’s still more satisfying to buy low, than it is to buy high. It may also pump the brakes on our orange pilling so that our loved ones don’t buy the top (or God forbid, buy XRP… which a guy on my sales team just did… *sigh*).
For me, this is important in the short-term because I have some hefty lifestyle expenses coming up. I want to buy my wife a new car and we may build a house this fall. This means that I will have to sell some sats to fund this purchase (no, borrowing against your Bitcoin at a potential tail-end of a bull market is not a good idea). This has gotten me thinking, will the four year cycle continue, and therefore, should I be taking profits here in the short-term, or does this bull market have legs? I’ve touched on this in my last two YouTube videos and I will continue to explore this in depth over the coming months as the paradigm COULD be changing in front of our eyes.
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Symptom #1: Investor Overconfidence
When you look at history, bull markets near their end when investors no longer think they can lose. You hear calls for a new paradigm, that assets can no longer have a bear market for xyz reasons and if there could be a bear market, it’s nowhere close. In Bitcoin we saw this with calls for much higher highs. In 2017, investors were calling for 50k, even 100k just at the tippy top. In 2021, 100k+ was the expected outcome, with other estimates reaching 300k or even 500k. This is overconfidence, the feeling that the bull market can go on forever.
This is probably an important spot to pause and state that I do think Bitcoin is going up forever. I think $10M is just the beginning of a sats-denominated world where human flourishing and technological advancements will wildly outpace the last 5,000 years of economic development. However, in the meantime, when dollars are still the medium of exchange and the standard of account for most people, we can expect Bitcoin to be adopted in cycles (Gartner hype cycles). At the top of cycles, you see the belief, thrill, and euphoria that ultimately marks the exact top (although hindsight is 20/20). The part of the market that feels the absolute best, is the time to take a few chips off the table, or to at least stop buying for a short period of time to digest the market dynamics. But this is hard to do, because every day, your portfolio is more valuable than the last. So, beware of investor overconfidence.
Grade: Yellow
I may be overconfident here… but I do not think we have reached peak investor overconfidence. With futures funding barely positive on Bitcoin and the MVRV at modest levels, I think this bull market still has some legs (in terms of price, and possibly in terms of duration). We are seeing a lot of selling from OGs, but as long as demand sustains, this market can continue to move higher (which I expect with BTCs, large ETF inflows, and stocks at ATHs). However, It’s important to mention that sentiment is elevated. We are 3 years off the bottom and this cycle has already seen Bitcoin move up over 700%. We are definitely not at under confidence and some caution is required, especially when it comes to margin and derivatives. As I’ve shared before, I’m 100% in spot Bitcoin with no more derivatives exposure to MSTR.
Symptom #2: Negative Regulatory Shifts
New regulation can be a silent killer for bull markets and this was especially true in 1929 and 2000. Both of these years marked generational tops for equities and both had regulatory shifts that impacted the markets. Today, possible regulatory shifts don’t seem as likely with a pro-Bitcoin (and crypto) administration. The GENIUS Act and DJT buying $2B of Bitcoin has soothed investors. This is why the bull market saw such a rapid acceleration in Q4 of 2024. Investors feared a continued anti-Bitcoin regulatory environment and with the red wave, they priced in the optimism of not only negative regulation disappearing (ie SAB 121), but the possibility of ultra-bullish regulation (de minimis exemption and the BITCOIN Act).
Grade: Green
I don’t think we are getting the BITCOIN Act. Unless it’s true that the US Marshalls have fewer Bitcoin than they advertise, which would upset the internet, then it’s possible. But the current situation is very healthy and should remain that way for the coming 3 years. I don’t think a regulatory shift will kill this bull market.
Symptom #3: Derivatives OI
Warren Buffett calls derivatives financial weapons of mass destruction. The BIS estimates that the value of financial derivatives is over $600T (Yes, TRILLION). Derivatives such as options or futures can be helpful risk-management tools for sophisticated investors, but when used to add leverage and fuel for speculation, they can literally nuke markets. Bitcoin saw this in 2021 (GBTC) and the summer of 2024 (Yen Carry Trade). Although 2021 did not see derivatives as the main driver of downside (that was fraud), GBTC was a pseudo-derivative that created a perpetual money machine, and when it turned negative, the market went down with it.
It’s important to keep an eye on open interest and funding rates for Bitcoin options and futures. As Bitcoin’s market cap grows in size, the open interest of these markets will naturally increase, however, if there are unsustainable increases in the notional value of Bitcoin’s derivatives compared to its market cap (which can be exacerbated when Bitcoin’s price is mooning), the bull may be close to end-of-life care.
Grade: Yellow
Bitcoin’s 3-year, step-function price rise has induced mini bear markets that have cleansed excess leverage. Each major move was preceded by a leveraged washout. 2023, 2024, and 2025 all saw massive leverage washed out of the market before the price moved higher. This measured move to the upside has allowed this bull market to be very sustainable. Leverage and derivatives OI (open interest) can build up very quickly, along with investor sentiment, so it is important to keep a close eye on this.
Symptom #4: New Innovation
Similar to 1929 which saw electricity, the steam engine, and other major technological advancements, AI and stable coins are the fuel of the current bull run. We can also compare this to the dot-com bubble and crash of the late 1990s as well. New innovation, while transformative, often brings investor expectations to unsustainable levels. Markets price in pure perfection, and when innovation takes longer than expected, markets reset, to aid a more sustained move higher. AI is the current culprit I see in 2025. It is very promising and will surely change the world, but the financial benefits of such infrastructure investment will likely take many years to reap benefits. And with current AI valuations through the roof (could go much higher) I think a period of reset and cooldown will be necessary down the line.
Grade: Red
AI has led equities valuations to a generational high. Many investors and critics are starting to doubt the immediate productivity impact that AI will have on the economy. Honestly, the current setup is eerily similar to 1999 with the dot-com bubble. If so, the bubble could inflate much more and the bull market could ramp up even more, but I have to grade this symptom as "red".
Where do we go next?
My personal score is 1 green, 2 yellow, and 1 red. This brings me to the subjective conclusion that we are still in a healthy period of the bull market. The economy is strong and government spending is continuing to propel all markets higher. For Bitcoin, the classic four-year cycle remains in question and ultimately, we won’t know the answer for another year or so. I’m about 50-50 on it it continuing. I see historical patterns that show a blow-off top is near, but I also see signs of a mature, secular bull market that could slowly bring Bitcoin to 400k by the end of 2028. We will cover this more in the future.
For me, I am getting near a stage where I need some capital to upgrade my life. I have spent the last 5 years putting every penny I could find into Bitcoin (and MSTR) and after seeing life changing gains, I plan to take a small percentage off the table. Your life is more important than Bitcoin or your other investments and I have an opportunity to upgrade my family’s life substantially by selling a small percentage of my stack in the coming few months, which I am planning to do. Jack Mallers (CEO of Strike) once said that taking lifestyle chips off the table in a bull market makes bear markets much more enjoyable.
That’s all for today, and as always, I’m probably wrong.
Matt