What’s Going on With the Crypto Market?
The crypto market has had its most exciting bull run in almost three years, as Bitcoin recently hit its new all-time high of $69,000, rising nearly 300% since last October. Altcoins and memecoins followed similarly exciting price movements, with the top 100 coins by market capitalization now worth over $1 billion — the same as at the peak of the previous bull market. Right after Bitcoin broke its ATH, it fell to around $60,000. This type of price action before the halving is unprecedented, and speculation seems to be at extreme levels, leading many to wonder where the market could go. Based on developing trends and prior market movement, let’s speculate on what will happen next.
Most experts would point to the Bitcoin ETF being the primary initial driver of this bull market. Institutions can hold Bitcoin like they would any other asset for the first time, creating regulatory and administrative ease. On top of this, all ETF issuers, like BlackRock and Franklin Templeton, promote Bitcoin to their institutional and retail clients alike, touting it as a hedge against inflation and government spending. The Bitcoin price began its dramatic rise a few months before the ETF came out in early January, as investors rightly anticipated the ETF would be a huge hit — it turned out to be the fastest-growing ETF ever, reaching billions of dollars in only a couple of weeks. This demand and renewed retail investor interest shot Bitcoin to a new all-time high on March 5th, only to rapidly fall back to around $10,000. Two days later, Bitcoin seems to slowly be crawling back toward its high, potentially ready to break out again.
On the one hand, all of this news seems incredibly positive, as retail investors are once again buying Bitcoin, which has been legitimized by institutions. On the other, the market seems to have already reached extreme levels of speculation, and this type of growth may not be sustainable in the long-term. This is demonstrated no better than by looking at the frenzy around meme coins — in the same week Bitcoin hit ATH, six of the top seven best-performing coins in the top 100 by market capitalization were memecoins. Even if it does not feel like retail has yet to enter the market, since Coinbase is still relatively low on the commonly-referenced App Store top 100 download list, there is clear price action being driven by unsophisticated investors.
Though there is no problem with some speculation in the crypto space, and it makes up the majority of the market, the issue becomes when this speculation is making up the majority of the price action and is completely unfounded. When people start buying coins because they believe they can time the market and sell them to someone else at a premium, the issues begin, and someone is ultimately left holding useless coins.
Interestingly, this is the first major bull market where Bitcoin has reached an all-time high before the halving, as the price hike typically comes in the following several months after this event. This is likely due to the new capital inflows from institutions. Though this could mean continual positive price movement leading up to the halving, it makes this market difficult to predict. The halving may become a “sell the news” event, and it would not be surprising to see Bitcoin decrease somewhat upon its arrival in April.
There are other events to be excited about that will increase the long-term fundamental value of cryptocurrencies. For example, Ethereum ETFs are set to be decided upon in May. If approved, which seems to be the likely outcome, they could see interest from institutions like the Bitcoin ETF did, albeit at diminished levels. Yet again, its release might be a “sell the news” event, but the only people selling will be retail, and institutions may use the opportunity to accumulate ETH at lower prices.
Bull markets are extremely exciting times and are when people make life-changing money. Though it may be easy to get caught up in the speculation and hype, it’s important, now more than ever, to create sell plans and emotionless decisions that will ensure that profits are locked in before prices inevitably fall. Stay tuned for an article in the coming days about the lessons learned and tips from someone who’s been through three crypto bull markets.
By Lincoln Murr
