Capital Rotation
DeFi Strategies • Yield Models • Token Income
cyclical asset flow pattern across market phases
Capital Rotation refers to the cyclical movement of investment capital between different asset classes, sectors, or token categories based on risk appetite, macroeconomic conditions, or market phase. In crypto, capital typically rotates from Bitcoin to Ethereum, then to mid-cap altcoins, microcaps, NFTs, and eventually back into stablecoins or real-world assets during downtrends. Understanding capital rotation helps anticipate where liquidity is moving next and when a trend may be topping or just beginning.
Use Case: After a strong Bitcoin rally, an investor notices ETH and large-cap altcoins starting to gain dominance while BTC consolidates. This signals a rotation from Bitcoin into Ethereum and the broader altcoin market — often the beginning of an altseason phase. As euphoria peaks in memecoins, the investor rotates gains into $KAG/$KAU for preservation before the inevitable correction.
Key Concepts:
- Bitcoin Dominance — Market indicator measuring BTC’s share of total crypto value
- ETH Dominance — Ethereum’s market share signaling rotation phases
- Liquidity Flows — Capital movement between assets and protocols
- Altcoin Signals — Indicators of capital rotating into smaller caps
- Dominance Divergence — When dominance trends conflict with price action
- Economic Cycles — Macro patterns that influence rotation timing
- 4-Year Cycle — Bitcoin halving rhythm that drives rotation waves
- Cyclical Markets — Recurring patterns in asset price behavior
- Cycle Awareness — Understanding market phases to time allocations
- Stablecoins — Safe haven during rotation exits
- Capital Rotation Map — Visual tool tracking rotation phases
- Cycle Exit Positioning — Strategic timing of profit-taking
- Reallocation Bridges — Pathways for moving capital between asset classes
- Kinesis Money — Real-asset destination for cycle exit rotation
Summary: Capital rotation is one of the most important signals in both traditional and crypto markets. It reflects shifting investor sentiment as capital moves from strongholds like Bitcoin into progressively riskier plays. Recognizing these flows — often visible through dominance charts, inflow/outflow data, and sector performance — helps investors ride momentum early and exit before the final peak. In crypto cycles, capital typically moves in waves: BTC → ETH → Large Alts → Small Alts → NFTs/memes → stables/real assets. Tracking this order provides an edge in timing pivots, exits, and re-entries.
Capital typically rotates through the following phases during a bull market cycle:
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Phase 6
– BTC dominance falling
– ETH/BTC ratio rising
– Altcoin volume increasing
– Stablecoin market cap declining
– Social sentiment euphoric
– New narratives emerging
Capital moving down the risk curve
– BTC dominance rising
– Altcoins bleeding against BTC
– Stablecoin inflows increasing
– Volume declining across DeFi
– Social sentiment fearful
– Narratives exhausting
Capital moving up the risk curve
– Heavy BTC/ETH allocation
– DCA through accumulation
– Minimal altcoin exposure
– Build positions in L1s
– Farm stables for dry powder
Foundation building
– Rotate % into quality alts
– Active yield farming
– Take BTC/ETH profits
– Watch dominance closely
– Begin Kinesis rotation
Growth + first exits
– Aggressive profit-taking
– Exit memes/narrative plays
– Rotate to $KAG/$KAU
– Minimal DeFi exposure
– Prepare for bear market
Preservation mode
– Monitor BTC.D daily
– Watch ETH/BTC ratio
– Track sector performance
– Note stablecoin flows
– Follow smart money wallets
– Use on-chain analytics
– Phase 1-2: BTC, ETH
– Phase 3: $XRP, $ADA, $AVAX, $FLR
– Phase 4: Mid-caps, DeFi tokens
– Phase 5: Minimal (if any)
– Phase 6: Kinesis $KAG/$KAU
– Bear market: Accumulate + preserve