PANews reported on July 11 that according to CoinDesk, it has been observed that bull markets tend to stagnate during periods of over-optimism and will only recover after the speculative bubble is cleared. Capriole Investment's cryptocurrency speculation index shows that the widespread excess speculation in the first quarter has dissipated, indicating that Bitcoin may usher in a new round of bull market price increases. The speculation index measures the percentage of altcoins with a 90-day return rate higher than Bitcoin, and is currently stable below 10%, far lower than the high of nearly 60% in January. Bitcoin, the largest cryptocurrency by market value, hit a new high of more than $70,000 in the first quarter, and then fell back to $58,000.

CoinGecko shows that as of this writing, there are over 14,800 altcoins in existence. Most of these have low liquidity and struggle to prove their use case. As a result, altcoins are often viewed as speculative vehicles, with their trading volumes closely tied to Google Trends, an indicator of retail investor interest. And altcoins’ outperformance relative to Bitcoin is seen as a sign of speculative mania. The bursting of speculative bubbles acts as a corrective mechanism, helping to bring asset prices back in line with fundamentals and curbing excessive speculation. As a result, they lay the foundation for a healthier market environment in the long term.

This is exactly what happened with the cryptocurrency market. Since 2019, instances where the speculative index was below 10% have coincided with the start of sharp Bitcoin rallies, as observed in the first half of 2019, the end of 2020, and the second half of 2023.