March 3, 2021

BOTS crypto news: Is this the end of the cryptocurrency bull market?

Over the past week, many cryptocurrencies took a nosedive. Bitcoin fell more than 20% and many Altcoins fell even harder in percentage terms. This is not the first time this year that Bitcoin has lost more than 20% of its value. Yet this time, compared to last month, there seems to be much more fear in the market. The fear and greed index indicated a score of 38 on March 1. That is the lowest score since September last year! Many people are wondering if this could be the end of the cryptocurrency bull market, just like it was in December 2017. In this article, I'll give you my take on this.

BOTS crypto news: Is this the end of the cryptocurrency bull market?
BOTS crypto news: Is this the end of the cryptocurrency bull market?

By Steven Eblé


Bitcoin's future price development is leading the entire cryptocurrency market. That's why we'll start with Bitcoin today.

Before the turn of the year, I shared the article 'Long-term view on Bitcoin and price estimation'. In that article, we also discussed the graph below. The chart below shows the Bitcoin logarithmic regression band. It is a logarithmic band that Bitcoin has remained within throughout its existence. The blue part of the band is the 'accumulation' zone and the red zone is where Bitcoin gets 'overextended'. In the previous three market cycles, Bitcoin made a top inside the red band. Currently, the red band runs from 75,000 US dollars to 150,000 US dollars. So this would mean that Bitcoin could rise another 70% to get into the red part of the band at all. So, the Bitcoin logarithmic regression band indicates that there is plenty of opportunity for growth and that we are not yet at a market cycle peak.

The Bitcoin logarithmic regression band is based on the previous three market cycles. But is this market cycle really comparable to the previous market cycles?

The previous market cycles were largely "consumer-driven", while the current market cycle is driven by institutional investors. It is quite possible that this market cycle top does not fall within the red zone. According to experts this market cycle top may turn out to be much higher than expected. This is because Fiat money continues to lose value and confidence while Bitcoin continues to gain confidence.

The chart below shows the outflow of Bitcoin from the Coinbase exchange. On March 1, 12,000 Bitcoins were withdrawn from the Coinbase exchange. The orange spikes are most likely investment funds buying and withdrawing Bitcoin from the exhange. Investment funds put these Bitcoins in cold storage, indicating they are not interested in short-term fluctuations. Continued confidence from institutional investors also indicates that this Bitcoin bull run is not over.

Total CryptoMarket

After stating above how I view the development of Bitcoin, below I will discuss the entire Cryptocurrency market cap. This is all the money that is stored in the crypto market. I showed above that there are reasons to believe that Bitcoin still has growth potential. But how is that for the Alt coins?

The chart below shows another logarithmic regression band, only this time for the entire cryptocurrency market cap. The red line within this logarithmic regression band is called the fare value line. This red line is an average of the entire price history and therefore represents a fair value of the total cryptocurrency market cap. It can be seen that the total cryptocurrency market cap is indeed a bit overvalued at the moment, as we are above the red line. But we know from previous cycles that the entire cryptocurrency market cap can become much more overvalued than it is now.

Below, all cycles are shown with special attention to the overvaluation of the entire cryptocurrency market cap compared to the fair value line. It can be seen that in the first cycle the overvaluation was almost 2000%. In the second cycle there was an overvaluation of about 1500% and in the third cycle, which ended in December 2017, the overvaluation of the total cryptocurrency market cap relative to the fair value line was around 1200%. With these three data points, we can estimate how large the potential overvaluation of the total cryptocurrency market cap is going to be in the current cycle. According to this model, the top has been reached as soon as the total cryptocurrency market cap line (yellow) touches the white dotted line. The white dotted line currently indicates an overvaluation of approximately 1000%. The current overvaluation is about 300%. This would mean that, based on this model, the total cryptocurrency market cap could become 3 times as overvalued.

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