The Mid-May Crash
Bitcoin and the entire crypto market have been on a wide rally since the last quarter of 2020. The total market cap of cryptocurrencies reached a peak of $2.4 trillion in April, which backed several bullish calls that the largest crypto could turn six-figure this year before facing a major correction.
However, the sentiments suddenly turned bearish as prices began dropping. Bitcoin whales were seen dumping coins on exchanges, which resulted in sufficient spot selling that caused a cascade of long liquidation in the derivative market.
There were several reasons to believe the bears have taken over the market. However, some analysts, including the popularly referenced Willy Woo, shared a couple of insights that suggested we were only halfway through the bull circle. This insight became more acceptable following the recent recovery in the market.
Crypto journalist, Ali Raza, shares a similar view. He mentioned that:
“Following the mid-May price crash, many suspected that we are entering a new bear market. However, as we have seen over the last week or so, the market has seen significant recovery which is unlikely to happen during bearish periods, and it is too early for it to have ended. While the price behavior signals that a bumpy ride is ahead of us, this might be just an exaggerated summer dip that the market is slowly recovering from.”
Are the Bears Short-Lived?
Judging by several indicators and analysis, it seems the cryptocurrency market is only in a dip and not a full-blown bear market.
What people fail to understand is the fact that this circle is completely different from the rest of other bull/bear markets we’ve experienced since the history of cryptocurrency. In a recent interview, Willy Woo noted that many traders are now “circle-imprinting” the 2013 bull market to predict the outcome of the current market circle.
In 2013, the price of Bitcoin corrected over 80 percent before reaching new highs. It’s worth mentioning that during the early years of Bitcoin, it was mostly used as a currency for payment, meaning it was continually being sold or exchanged between liquid hands. However, the fundamentals have changed.
More people have become long-term holders, including corporate investors. This is evident following the declining number of Bitcoin held on all exchanges.
Additionally, the number of Bitcoin users has been rising with every proceeding year, which is also a factor that differentiates the previous circles from the recent ones. On this note, it’s speculated that the 2021 peak is expected to end at levels higher than the peak in 2017.
Will the Market Recover by Christmas?
The Bitcoin and crypto market has historically proven to be bullish towards Christmas. For instance, Bitcoin gained 48 percent in December 2020.
“Excluding December 2018, the market has historically always seen a surge around Christmas, so there is a high likelihood that this could happen again. Of course, little is certain when it comes to the crypto industry, and a single negative event could significantly turn the tide,” says Raza.
There is a likelihood that history might repeat itself again this year, provided the accumulation rate continues to increase. Of course, Bitcoin price can still be affected by FUDs and bearish developments, as seen in the case of Tesla and the Chinese crackdown on crypto mining, which negatively affected both the Bitcoin network hashrate and price.
“With that said, adoption continues across the globe and everything indicates that crypto usage should continue to grow, possibly accompanied by the prices,” Raza added.