Recently, the price of cryptocurrencies has dropped significantly, with a low of 9.3 yesterday, and other altcoins have also dropped by 20-30%, causing a lot of fear among people, with many saying the bull market is over. Here, I can clearly tell everyone that the bull market has not left. As for the reasons, everyone should know that it is due to the hawkish statements from the Federal Reserve, which, I believe, will improve once Trump is in office. Another reason is that the West is approaching the New Year - Christmas. As the proportion of institutional funds in the crypto space increases, some institutional funds will definitely choose to avoid risks during a 7-day long holiday by withdrawing their money. After all, the crypto space trades 24/7, and if one's assets are stolen while on vacation, it would be very unpleasant. Therefore, they would rather withdraw their money to avoid risk.
First, let’s review how the prices of cryptocurrencies performed around Christmas in previous years: Currently, I have listed up to 2017, as prior to that, there was almost no institutional involvement, and significant institutional entry happened during the last bull market.
This table shows the general price performance of BTC that I looked up. The period from 2022 to 2023 was a bear market, so it hardly changed. The year 2021 marked the end of the bull market, hence the drop. The year 2020 was a precursor to the bull market of 2021, which was a rise. The years 2018-2019 were declines. The year 2017 was a major bull market, therefore the period after Christmas was rising.
Based on this trend, this round is likely to rise after Christmas because this bull market should resemble the early part of 2023.
So why do I say we have not yet turned bearish? Let’s look at a few indicators:
1. Market Cap Proportion of Bitcoin and Ethereum
- Bitcoin's Dominance: The proportion of Bitcoin's market capitalization is usually used to measure the market's dependence on Bitcoin. If Bitcoin's market dominance remains high, it generally indicates positive overall market sentiment and that the bull market may still be ongoing.
- Ethereum's Dominance: Ethereum also performs strongly during bull markets. If Ethereum's market share increases, it indicates that the demand for applications like smart contracts and DeFi is still growing.
Currently, Bitcoin's market cap proportion is 57.4%, and Ethereum's is 12.1%. In the bull market of 2021, Bitcoin's proportion dropped to as low as 40%, while Ethereum's reached 18.5%. Looking back at the bull market of 2021, Bitcoin's proportion was continuously increasing during 2020, while the peak was declining for Ethereum, which is the opposite. Similarly, you can observe the trends from 2017.
Currently, Bitcoin's market proportion is continuously strengthening, indicating that momentum is building, and it is impossible for it to turn bearish right now.
2. Trading Volume
- Trading Volume is an important indicator of market activity. Sustained growth in trading volume usually indicates a positive market sentiment and active investors. Currently, trading volume is indeed continuing to rise and is already about twice that of 2021, at around 150 billion, while the peak in 2021 was over 300 billion. So, surprisingly, the current volume has not yet surpassed the peak of 2021. With more institutions entering the market, this wave will definitely have a higher daily average trading volume than the previous one, at least 600-800 billion.
3. Altcoin Season Indicator
The altcoin season indicator is somewhat similar to the BTC dominance, but it focuses more on the proportion of altcoins. Many people say the altcoin season is over, but I have always emphasized that the altcoin season will definitely return. First, everyone saw the frenzy of altcoins at the end of November, although it was relatively brief. However, as long as the bull market has not left, we can be certain that there will be a continued altcoin season.
Don’t be fooled by the strong performance of altcoins this wave; the altcoin index has only reached around 50. As seen in the chart, the peak altcoin season index in 2021 reached over 90. Even if this wave is worse than the last, it should at least hit 70-80; it cannot end at 50, so there is still a crazier altcoin season ahead!
4. Rainbow Chart
We have been monitoring this indicator, which has currently reached the lower edge of the rainbow chart pipeline, still trending upward.
In 2021, it at least reached the fourth position on the chart. I also roughly noted the mid-position price of BTC on the rainbow chart, which predicts 200,000 USD!
5. Number of Active Addresses
- The number of active addresses reflects how many users are trading or holding cryptocurrencies. If the number of active addresses continues to increase, it indicates that the market is attracting more new users, which is often a signal of a bull market. As seen in the BTC total address data in the chart below, during the bull markets of 2017 and 2021, the increase was rapid and steep, but currently, no such rapid change has been observed.
6. On-Chain Indicators
- Network Hash Rate (especially Bitcoin's Hash Rate) can be used to gauge miners' confidence. If the hash rate continues to grow, it indicates that miners remain optimistic about the network's security and long-term value. The current hash rate is around 830, with no downward trend.
- Total Value Locked (TVL): The total locked amount in DeFi protocols reflects market demand for decentralized finance. If TVL continues to grow, it indicates that the bull market is still ongoing. Currently, TVL has not yet reached the heights of 2021, but this wave will definitely be 2-3 times higher than the previous one, as there are so many chains, applications, and various L2s emerging.
In summary, it is absolutely impossible that we have reached the peak of the bull market and turned bearish; at most, we can say we are in the mid-phase of a bear market. The conclusion seen from the rainbow chart indicates that the starting point for this bull market is at least 200,000 USD.
Below, I will share an annual summary that I found interesting. One chart that I think is quite informative shows the performance of the top 50 cryptocurrencies over the past year. Among them, the biggest gainers are HBAR, BGB, XML, and XRP. We all know these are undervalued, but the key is to look at the last few that have dropped, like FET and TAO. These two are leaders in AI and have dropped significantly after a huge rise at the beginning of the year, making them quite a good value now. STX is also a leader in BTC L2, and NEAR, TON, OP, and APT are also worth paying attention to. As for token strategies, we will discuss that in our community.
