Has the crypto market cycle broken?

Has the crypto market cycle broken?

Market cycles in crypto are price fluctuations that tend to be repetitive and predictable based on the Bitcoin Halving event. However, in the 4th Bitcoin Halving cycle, everything is gradually going out of rhythm.

Familiar crypto market cycle

Bitcoin Halving is an event that reduces the block reward by half for Bitcoin miners, helping to control inflation and increase the scarcity of Bitcoin.

This event has a strong correlation with Bitcoin price. Accordingly, Bitcoin price usually peaks about 300-500 days after Bitcoin Halving. Specifically:

·      1st Bitcoin Halving: Bitcoin increased 97 times, peaking about 370 days after Halving.

·      Second Bitcoin Halving: Bitcoin increased 30 times, peaking about 554 days after Halving.

·      3rd Bitcoin Halving: Bitcoin increased 7 times, peaking about 336 days after Halving.

·      Bitcoin price tends to increase sharply after each Halving period. Source: Glassnode

·      Before 2024, looking at past data, many experts expect Bitcoin price to peak about 300-400 days after the 4th Bitcoin Halving, in mid-2025.

Regarding cash flow, after Bitcoin increases strongly, cash flow often moves to other coins with lower capitalization such as Ethereum and large-cap altcoins, before moving on to midcap altcoins (midcap altcoins) and low-cap altcoins (lowcap altcoins).

How money flow worked in the crypto market before.

This phenomenon is called altcoin season. Finally, the money flow stopped at meme coins, implying that the market had peaked and was about to plummet. However, all this seems to be changing.

Bitcoin hits ATH before Halving

On March 5, 2024, Bitcoin created a new peak on some exchanges about 30 days before the Halving. This has never happened in history. It creates shock for many investors, especially those who rely on historical data to trade.

Bitcoin's growth this time is mainly driven by Bitcoin ETFs investment funds. These funds allow traditional investors to convert a small percentage of their portfolios to Bitcoin.

Bitcoin received huge cash flows from Bitcoin ETFs (as of March 6). Source: Farside Investors

Bitcoin has a total supply of 21 million, with 900 Bitcoins mined every day. This number reduces to 450 Bitcoins after the next Halving. Meanwhile, an average of 5,378 BTC was purchased each day from February 20 to March 6 by Bitcoin ETFs.

According to data from Blockworks (here), Bitcoin ETFs are holding 4% of the total Bitcoin supply. If Bitcoin demand from Bitcoin ETFs increases, with a fixed supply, Bitcoin price could increase even more.

Many investors believe that Bitcoin price may be going faster than history, or this cycle will be larger than previous cycles.

“This cycle's recovery and price increases are happening faster than in previous years. This speaks to the growing acceptance and trust of Bitcoin holders in the market. Another possibility is that accelerated demand from the market, largely driven by Bitcoin ETFs, means this cycle will be larger than the last,” said Brett Munster, portfolio manager at Blockforce Capital. , shared with Forbes.

FOMO sentiment reached its peak but quickly faded when Bitcoin price plummeted 6.7% after just over an hour to reach a new peak.

Bitcoin reaches new high before the 4th Bitcoin Halving. Source: Bitcoin Rainbow Chart

Thus, Bitcoin price is running very differently from previous cycles, signaling a volatile future. Not only Bitcoin, the cash flow in the crypto market also has clear differences.

Memecoin increased sharply after Bitcoin

After Bitcoin price increased sharply from 15,000 USD to nearly 69,000 USD, attracting the attention of all investors, money continued to pour into memecoin, not Ethereum or altcoin like previous cycles. Should we reconsider how money moves in crypto?

Besides Bitcoin, memecoins account for the majority of trading volume.

Memecoin's price increase and huge transaction volume can come from the following 5 main reasons:

1. Long/short positions

Memecoin has a very large number of shorts. After $50 million worth of memecoin short positions were liquidated, they created a short squeeze, forcing other memecoin short sellers with hundreds of millions of dollars of positions to close their positions to cut them off. losses, contributing to pushing memecoin prices higher.

2. Accepted by ecosystems and VCs

Currently, memecoin is not only a token born for entertainment purposes, it is also used by blockchain ecosystems as a marketing tool.

Solana's Saga phone airdrops to buyers 30 million BONK memecoins. The rising price of BONK caused the Saga phone to go out of stock, especially when users discovered that the amount of BONK memecoins airdropped was more valuable than the phone itself.

Many venture capital funds also invest in memecoin. Bitgert Ventures was one of the first VCs to announce plans to invest $3.5 million in memecoin Vita Inu. By February 2024, DWF Labs also announced an investment of 10 million USD in memecoin FLOKI.

3. Listed on many major exchanges

Not only attracting the attention of ecosystems and VCs, memecoin is also continuously listed on major crypto exchanges, making it easy for investors to access and trade.

As of March 2024, there were 10 memecoins listed on Binance such as SHIB, PEPE, BONK, WIF... Even the MEME token of the 9GAG project was launched on Binance Launchpool at the end of October 2023.

4. New cash flow into the market

The futures contract volume of meme coins PEPE, SHIB, BONK and FLOKI reached 1.5 billion USD in early March 2024, according to Coinglass. This proves that there is new money flowing into the market.

5. Large supply

Most memecoins have a large supply, causing their prices to have a lot of zeros in front of them, making them appear very cheap. For new investors, they think that buying cheap coins will be easier to xxx account than high priced coins.

In addition to the above reasons, memecoin also increases in price because the general market sentiment is in a very good state, stimulating investors to make transactions.

Need to prepare more to win this cycle

Previously, investing in Bitcoin or crypto was mainly done by retail investors, controlled by emotional cycles in investing from greed to fear. With the participation of big Wall Street investors who manage tens of trillions of dollars in assets, the Bitcoin or crypto game is now very different.

In November 2020, Bitcoin's capitalization broke the ATH of the 2017 cycle. Two months later, the entire crypto market capitalization broke its ATH.

By March 2024, Bitcoin's capitalization continued to break the ATH of the 2021 cycle, reaching 1.35 trillion USD, on par with the market capitalization of silver globally. Will the entire crypto market capitalization continue to break ATH in the next 2 months as in the past?

Regardless of the outcome, investors should be prepared for all developments in the market. According to some sharing from Mr. Nguyen The Vinh, co-founder of Ninety Eight company, investors need to clearly define their goals and trading strategies in the uptrend market. Long-term investments should be independent funds. Investors should not try to optimize profits by arbitrage trading or using leverage if they are not confident in their trading abilities.

And of course, investors should diversify their investment portfolio, carefully research the market, be responsible for their investments as well as control their emotions in investing