Recently, the price of cryptocurrencies has dropped sharply, with a low of 9.3 yesterday, and many altcoins also fell by 20-30%. Everyone is very fearful, and many say the bull has left. Here, I can clearly tell everyone that the bull has not left. As for the reasons, everyone should know, the hawkish statements from the Federal Reserve will likely improve under Trump's administration. Additionally, there is another reason: the Western world is approaching the New Year - Christmas. Since the proportion of institutional funds in the crypto circle is increasing, some institutional funds will definitely choose to hedge during a 7-day long holiday by withdrawing their money. After all, the crypto market trades 24/7, and if one gets robbed while on vacation, that would be very unpleasant. Moreover, one wouldn't enjoy their holiday, so it is better to withdraw and hedge.
First, let's review the performance of cryptocurrency prices before and after Christmas in previous years. Currently, we have listed up to 2017, as institutional involvement was almost nonexistent before that, and significant institutional entry began during the last bull market.
This table shows the approximate price performance of BTC that I checked. The years 2022-2023 are a bear market, so there has been almost no change. The year 2021 was the end of a bull market, hence the decline. The year 2020 was the prelude to the bull market in 2021, so it saw an increase. The years 2018-2019 were declines. The year 2017 was a major bull market, so there was a rise after Christmas.
According to this pattern, the next rally is likely to occur after Christmas, as this bull market should resemble the beginning of 2023.
So why do we say that we have not turned bearish yet? Let’s look at a few indicators:
1. Bitcoin and Ethereum's Market Cap Proportion
- Bitcoin's Dominance: The proportion of Bitcoin in the total market capitalization is often used to measure the market's reliance on Bitcoin. If Bitcoin's market dominance remains high, it usually indicates a positive overall market sentiment, suggesting the bull market may still be ongoing.
- Ethereum's Dominance: Ethereum tends to perform strongly during bull markets. An increase in Ethereum's market share indicates that demand for smart contracts and DeFi applications is still growing.
Currently, BTC's market cap proportion is 57.4%, and Ethereum's is 12.1%. During the major bull market of 2021, BTC's proportion dropped to a low of 40%, while ETH's proportion rose to 18.5. Looking back at the bull market of 2021, BTC's proportion kept increasing during 2020, peaking before declining, while ETH's was the opposite. Similarly, one can look at the trends in 2017.
Currently, BTC's market proportion is continuously increasing, indicating that momentum is building, and it is unlikely that we are turning bearish now.
2. Trading Volume
- Trading volume is an important indicator of market heat. A sustained increase in trading volume usually indicates positive market sentiment and active investors. The current trading volume is indeed continuously rising and is already about twice that of 2021, currently around 150 billion. The peak in 2021 was over 300 billion, so it’s surprising that it hasn’t surpassed the 2021 peak yet. With more institutions entering, this wave will definitely see higher daily trading volumes than the last one, at least 600 to 800 billion.
3. Altcoin Season Indicator
The altcoin season indicator is somewhat similar to the BTC dominance but focuses more on the proportion of altcoins. Many people say altcoins are done, but I have always emphasized that there will definitely be an altcoin season. First, everyone saw the craziness of altcoins at the end of November, which, although brief, was significant. As long as the bull market hasn't gone, we can be sure that there will be continued altcoin seasons ahead.
Don’t be fooled by the surge in altcoins; however, the altcoin indicator has only reached around 50. Looking at the chart, the peak altcoin season indicator in 2021 was over 90. Even if this wave is worse than the last, it should at least reach 70-80; it cannot just end at 50, so there will definitely be a crazier altcoin season ahead!
4. Rainbow Chart
We have been monitoring this indicator, and it has only reached the lower edge of the rainbow chart pipeline, still within an upward trend.
The year 2021 also reached at least the fourth position, and I roughly checked the BTC price in the middle position of the rainbow chart, which predicts $200,000!
5. Active Address Count
- The active address count reflects how many users are trading or holding crypto assets. If the active address count continues to increase, it indicates that the market is attracting more new users, which is often a sign of a bull market. The data for total BTC addresses shows that during the bull markets of 2017 and 2021, there was rapid growth, but currently, there hasn’t been such a quick change.
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 means miners remain optimistic about the network's security and long-term value. The current hash rate is around 830, with no signs of decline.
- Total Value Locked (TVL): The total locked value 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 last one due to the emergence of so many chains, applications, and various L2 solutions.
In summary, it is absolutely impossible that we have already reached the peak of the bull market and turned bearish. At most, we are in the mid-phase of a bear market, and the conclusion from the rainbow chart is that this bull market starts from at least $200,000.
Next, I want to share an annual summary I saw, and one chart I found particularly informative is the performance of the TOP 50 cryptocurrencies over the past year. It can be seen that the biggest gainers are HBAR, BGB, XML, and XRP. This is obvious, but the focus should be on the last few that have declined, such as FET and TAO, which are both leaders in AI. They surged too much at the beginning of the year, and now they are down, which actually makes them quite a good value. STX is also a leader in BTC L2, and NEAR, TON, OP, APT are worth keeping an eye on. As for token strategies, we will discuss in our community.
