The crypto market has been shaken up in recent weeks. We saw the bitcoin (BTC) rate decrease in value by more than 50% from its current all-time high (ATH), cardano (ADA) shoot back from $2.50 to $1 and plunge the total market cap back down by over $1 trillion. Was this the end of the bull market and is bitcoin now heading to $0 without a break? I do not think so.
Cause
Last week I wrote about the recent declines. The cause was a great panic among investors, especially investors who only just entered the market. They sold en masse after Elon Musk’s messages. After further panic arose after news from China, the panic continued. Fortunately, we are slowly seeing calm return and the prices may now form a bottom.
Was this correction something unique? Since the bitcoin price is a direct reflection of supply and demand, the price has always been volatile. For example, if we look at the corrections made in the past have taken place, we see that the recent decline was the sixth most severe correction ever. The top 3 corrections were all price drops of more than 80%. And bitcoin still exists.
Was $60,000 the top?
Then the question remains, was the bitcoin price of $60,000 the top of this cycle? Of course, nobody knows what the price will do in the future. However, we can look at a number of factors, including past patterns and analyst models. It is such a model stock-to-flow (S2F) model of Plan B. His model looks at how many new bitcoins are coming to the market and how many bitcoins are already in circulation. And according to this model, we are no longer there.
Just to be clear: I do not think $60K was the top, far from it, because I do not see the kind of transactions that normally happen after an ATH (red dots). In fact, I think we are just a couple of months out of the bear market (blue dots). And yes, this on-chain view fits S2F(X). pic.twitter.com/omLh23MsrX
— PlanB (@100trillionUSD) May 18, 2021
Other signals
When we look at the past, we see that bitcoin has not yet made the expected move after the most recent bitcoin halving (a mechanism that halves miners’ rewards every four years and makes bitcoin more scarce). This is nicely shown in the chart below where the black line represents the current price and the green and red lines are the past prices. At the bottom you will find the number of days since the most recent halving. In short, for the green line that was the halving in 2012, for red in 2016 and black in 2020.
Not even close pic.twitter.com/cYgBjGbGho
— J.D. Roppolo???????? (@CrypticPigFarm) May 18, 2021
Again, such models and comparisons are of course no guarantee. However, I personally see that the crypto market is red hot (in the positive sense), with large institutional investors stepping in and crypto startups making huge strides.
This morning I wrote another article about Circle, the company behind the USD Coin stablecoin. That company raised $440 million from investors, the largest investment ever in a crypto company. However, for me the most interesting fact is that of the 12 largest crypto startup investments ever, no fewer than five were made this year. Also don’t forget the news of President Biden who wants to pump another astronomical amount into the economy and printing thousands of billions of dollars, which will likely lead to inflation. No, as far as I’m concerned, the crypto train is only gaining steam.
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