The end of the crypto bull run?

After several months of strong returns, the crypto market is showing signs of exhaustion. Momentum is slowing, optimism is waning, and volume is decreasing. It is entertaining to observe the reactions from market participants in these situations. When the prices are soaring, everybody is confident that “BTC over $100k in 2021 is inevitable.” Still, when the first noticeable pullback occurs, many investors immediately start asking: “Is this the end of the bull run?”

We are currently in a sideways movement which is normal and healthy market development. After such a strong upward move, the market usually consolidates for some time and prepares for the next leg up. If you look at the BTC chart from 2017, you can see that there was a correction/consolidation period after every significant price increase. BTC has spent roughly the same time in sideways movements as it spent in upward trends (click on any image below for a larger version).

BTC chart 2017a

We believe that this crypto bull run is far from ending. The activity is just starting to heat up!

Market overview

February started on a positive note, generating a 108% return during the first three weeks of the month. On 20 February, the crypto market capitalization reached $1.76 trillion, out of which, for the first time, Bitcoin claimed over $1 trillion.

Nevertheless, the market’s overly bullish stance was put to the test in the following three days, when the crypto market corrected by -21.6% and further declined by an additional -5.3% by the end of the month. That said, the market ended the month with an exceptional return of +54.99%.

Chart 1 - Crypto market performance (2021-02)

Nearly all the top 25 crypto assets by market cap recorded a positive monthly performance in February, with the exception of Ripple (-16%). The top three performers were Binance Coin (+373%), Cardano (+280%), and Solana (+207%). Bitcoin posted a mid-range return of +36%, whereas Ethereum recorded a lower-end gain of 8%.

Chart 2 - Top 25 assets by market cap performance (2021-02)

While retail investors were concerned about the recent market correction, institutional investors saw the sell-off as a buying opportunity. MicroStrategy added an additional $15 million worth of Bitcoin to its balance sheet and the long-term critic of Bitcoin, Kevin O’Leary from Shark Tank, reversed his stance on cryptocurrencies, adding a 3% allocation to his portfolio.

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DISCLAIMER: This article is for informational and discussion purposes only and does not constitute a marketing message, an investment survey, an investment recommendation, or investment advice. The article was prepared exclusively for a better understanding of market dynamics.