The cryptocurrency market is in the “Banana Zone” and heading toward the “Banana Singularity” – a phase where “everything is bullish,” according to Raoul Pal, co-founder and CEO of Real Vision.
“Banana Zone” is a term coined by Pal to describe a period of strong price increases.
“Yes, we are still in the Banana Zone,” Pal wrote on X, adding that the first phase of this bull run was the breakout last November.
This phase is then followed by the current accumulation phase — similar to the 2016/2017 cycle — Pal said, before emphasizing: "This will not last long."
According to Pal, the next phase in the 'Banana Zone' is 'Banana Singularity' – the moment when Altseason occurs, when 'everything is rising', before entering a larger accumulation phase.
The altcoin season typically occurs after Bitcoin's dominance decreases, and currently, this ratio remains high at 58%.
DeFi researcher 0xNobler seems to agree with Pal, arguing that "Bitcoin has just entered the acceleration phase," predicting prices will soar to $500,000, igniting the largest altcoin season in history.
However, CoinMamba futures trader is more pessimistic:
"The market is undergoing a significant downturn, and if altcoin prices just recover to levels seen a week ago, it will be enough to create an altcoin season."
Meanwhile, Pal stated that the third phase of the Banana Zone is 'when core assets break out to much higher levels, also known as the 'concentration phase'.'
Despite the market correction this week, total market capitalization has increased by 90% compared to the same period last year, from around $1.8 trillion to the current level of $3.4 trillion after spending most of 2024 in an accumulation phase.
Additionally, total market capitalization reached an all-time high of $3.9 trillion on December 17, 27% higher than the previous cycle's peak.
Cryptocurrency Market Capitalization | Source: Coingecko
Last year, Raoul Pal accurately predicted that the cryptocurrency market would rise in September before breaking out of the accumulation phase.
"As global liquidity increases, cryptocurrency will rise, along with other markets like Nasdaq," he said at the time.
In a separate post on January 10, Pal shared a chart showing the correlation between Bitcoin and global M2 money supply, indicating similarity with the 2016/2017 cycle, when prices fell before rising again.
"Everything will be fine. It may drop a little more or it may have already ended. Regardless, prices will be higher over time. It probably won't repeat exactly, but just be a similarity."
The market has been in the Banana Zone since breaking out of the accumulation phase in early November, with a rapid upward move driven by Donald Trump's presidential election victory.
The Cryptocurrency Fear & Greed Index dropped 19 points
The Cryptocurrency Fear & Greed Index — a measure of market sentiment for Bitcoin and cryptocurrency in general — dropped 19 points in one day, reaching its lowest level since October 14.
The drop to 50 on a 100-point scale is one of the most significant daily declines of this index in recent years, bringing market sentiment into the 'Neutral' zone after three months in the 'Extreme Greed' and 'Greed' zones.
Cryptocurrency Fear and Greed Index | Source: Alternative.me
This occurred as Bitcoin's price fell below $92,000 on January 9, following reports that the U.S. Department of Justice had been approved to sell 198,000 Bitcoins, worth $6.5 billion seized from Silk Road, although none have been sold yet.
Analysts also believe that this decline is related to expectations that the U.S. Federal Reserve (Fed) may tighten monetary policy in 2025, which would impact Bitcoin and the cryptocurrency market in general.
Rising Government Bond yields and a stronger USD have also kept Bitcoin primarily below the recent $100,000 mark.
Bitcoin ETFs in the US experienced the second-largest outflow of nearly $570 million on January 8, signaling that Bitcoin may face further corrections, according to Markus Thielen, founder of 10x Research, speaking on January 5.
The Cryptocurrency Fear & Greed Index scores based on market volatility (25%), trading volume (25%), social media sentiment (15%), Bitcoin dominance (10%), and trends (10%) to achieve an overall score.
The index peaked at 94/100 on November 22, 2024, as the market reacted positively to Donald Trump's Republican presidential election victory and speculation about the U.S. strategic Bitcoin reserve in 2025.
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