Understanding the "Post-Top" Phase of the Cycle

Level 2 - Value Investor

Welcome Avatar!

Most participants intuitively understand price. You’ve all seen vomit inducing red candles in crypto.

However, the post-top phase of crypto cycles has a a much more effective (albeit slower) weapon for freeing you from your coins. Time capitulation. The 6 month period where seemingly nothing happens. The volatility that brought you to crypto disappears and your Twitter feed gets quiet.

The “experts” who were posting 100x gains pivot to AI. People forget about crypto bull markets. They also forget the euphoria they felt, and the painful lessons they learned from buying the top (this is a good thing for the astute readers staying plugged in).

Big players love this phase because they can accumulate leisurely without competing with frontrunners. When you find yourself checking the price only once a week instead of once an hour, you are in the middle of time capitulation.

A lot of noise is made in crypto about tops, bottoms, and the cycle. However, we don’t spend that much time in the tops and bottoms. Most of your time is the “in between” period where most people aren’t able to make sense of what’s happening. Today we’ll explain the “post-top” phase of the crypto cycle.

The Cycle Continues

First off, the cycle pattern continues if you consider November 2021 as the end of the 2021 cycle instead of May 2021 (we do).

Bitcoin made its final cycle high on November 10, 2021 near $69,000. In 2025, Bitcoin again peaked in early October, this time above $126,000, before the market suffered the largest liquidation event in crypto history a few days later. Bull markets end quickly and viciously. The post-top repricing takes longer.

The December 2017 top to the November 2021 top was 1,424 days. The November 2021 top to the October 2025 top was 1,426 days. We’re not saying the four year cycle is law, just that it continues to matter to enough market participants to drive outcomes. The data is strong enough to continue to take the cycle framework seriously.

The Mechanics

A very specific phenomenon occurs at tops. Long-term holders and smart money have finished distributing their coins to short-term holders and FOMOers. By the time the top is reached the percent of supply held by short-term holders is at multi-year highs. These weak hands have a high cost basis, little loyalty and ungrounded belief in the asset. This cohort may also deploy leverage, which means they can be sitting in a asset that is “flat” in price but is being taxed by funding fees. When they begin to panic sell they create the first leg of the repricing. Smart money isn’t interested in stepping in without a major discount.

With leverage at peak levels and major buyers sitting out, a small 5-10% dip in spot prices (easily caused by long-term holders taking profits) turns a selloff into a liquidation cascade.

The immediate post-top environment is a liquidity vacuum. In a parabolic rally the order book becomes top heavy. There are lots of market buy orders at the peak but few bid orders underneath because buyers are waiting for a dip that never comes (until it does). When it breaks the bid side of the order book is thin. A single large sell order can skip through multiple price levels because there isn’t enough capital waiting to absorb the selloff. We broke down the October 2025 crash in-depth here.

In this phase there is still opportunity. The market feels fast and exciting, just in the opposite direction. It’s like you left a big party. You know you drank too much. But you’re still in the uber home. The hangover is yet to come.

The Boring Hangover

Think of the market as a series of cause and effect actions. There are people, institutions, and other entities with capital, together termed “market participants.” Their collective participation and perceptions of other participants shape the market. Markets are driven by both rational analysis and emotion. That means you have to be able to understand both logic and emotion to truly understand what makes markets tick.

After the initial crash, the market doesn’t just immediately bottom and go back to highs. This much is obvious to anyone watching BTC prices in recent months. When the initial selling peaks shorts cover positions and knife catchers will often cause a big bounce. Eventually though prices fall back to feel where sellers still exist. When prices start holding it can mean supply is starting to dry up. This is basically what occurred through Q1 as prices bouncing between big walls.

Remember how we mentioned that big players “distributed” their coins in the bull market (that big party)? That takes them some time! They went to the same party and didn’t drink much at all. They’re not hungover, they got up to prepare for a marathon. As bored retail players and non-believers exit their “dead” bags these institutions slowly absorb them while trying to make as little noise as possible. To crush the will of even true believers big players try to shake them out.

To resume the bull market all speculators need to be emptied of their coins. This takes time and pain. For those of you who have been through multiple cycles you will surely have experienced at least one cycle with brutal pain and losses. It’s by design.

What about altcoins?

When Bitcoin and Ethereum experience a post-top repricing, the altcoin market experiences a mass extinction event. During the party, money flows from BTC into increasingly speculative assets. This used to be “alt season” though we have held for years now that the alt season of the old days has now made way for a period of outperformance only for alts that have a) strong fundamentals or b) unique narrative that people are unable to value. As the cycle turns there’s no bid for alt coins. We do expect this to change with greater institutional access to crypto assets and there being more crypto assets worth holding. HYPE is a notable standout as an altcoin that maintained a bull market valuation in a bear market.

How to Survive

If you’ve already survived the crash the “hardest” part is over. Now you’re just in the most annoying part.

First things first, no hero plays or hail marys. If you’ve been running a 2024-style playbook you’ve probably already been separated from your capital well before the first letter was typed on this post. If not, here is your last warning. If you can’t see yourself holding your current positions for another 12 months you are overleveraged or in the wrong coins.

Then work backwards. For the coins you do hold work backwards from where you expect them to be in 6 months, 1 year, 3 years, and beyond. No this is not about price. List out the following beside each asset:

• Narrative (why will people care about this theme in the future?)

• Qualitative fundamentals (team, market leadership)

• Quantitative fundamentals if applicable (revenue, profit, TVL)

Let’s take Bitcoin since it’s an example everyone can understand.

• Narrative: People will always care about having an asset that exists outside the control of the state. Bitcoin is the best asset for this purpose. Therefore it looks good from a narrative standpoint for the foreseeable future (there are other strong narratives around Bitcoin but you get the point)

• Qualitative fundamentals: Largest, oldest crypto asset with institutional acceptance and cult following.

And so on.

Now you can think like an institution and focus on accumulating the few coins you’ve been watching that pass the standard.

In the mean time you can focus on getting your cash flow up so you have more investable assets for the next bull market.

No matter how hungover you are the sun will rise again and you will be fine. Just remember not to drink so much at the next party.

Until next time..

This is a free post. Sign up to the paid sub for market takes and deep dives on specific tokens.

Paid subscribers also get access to:

• All of our past posts

• Weekly Deep Dive Report

• A comprehensive bi-weekly DeFi Roundup

• Bi-weekly Q&A sessions with our team

Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.

• We now have a full course on crypto that will get you up to speed (Click Here)

  • We offer the Prediction Markets module on a standalone basis (Click Here)

• Security: Our official views on how to store Crypto correctly (Click Here)