Cyclical Top Sign

Definition ∞ A cyclical top sign indicates a potential peak in a market cycle, suggesting a reversal in price trend may occur. This market indicator refers to a set of technical or on-chain signals that historically precede significant price declines following a period of sustained growth. These signs often include extreme overbought conditions, declining trading volume on rallies, increasing negative divergences in momentum indicators, or a substantial increase in profit-taking activity by long-term holders. Recognizing these patterns assists traders in anticipating market shifts.
Context ∞ Analysts regularly reference cyclical top signs when discussing market sentiment and potential corrections in digital asset prices. News reports frequently highlight these indicators during bull markets to caution investors about impending volatility or a possible downturn. Understanding these signals is essential for evaluating market health and making informed decisions in cryptocurrency trading.