I am a tech enthusiast and I believe there is a real future for cryptocurrencies. Those of us that follow cryptocurrencies know that Bitcoin and other cryptocurrencies have been seeing explosive growth this year. This is the growth over the past year, a growth of almost 1000%:
We were clearly in a bull market. However, the crypto market has had strong bull runs before, only to be followed by a bear market of ~3 years and in that time, most coins drop in price up to 90% from their previous all time high (ATH). I’ve seen many YouTubers and Redditers claim the next bear market will start at the end of the year or even next year. I could be 100% wrong, but I think the bear market started yesterday.
It’s usually a bad idea to time the market. If I really believe in crypto, I have nothing to lose by enduring another bear market. However, I’ve seen a lot of people over invest and if their investments drop significantly, they are in significant financial distress. So much so that in past crashes, the suicide hotline has been pinned to the top of various crypto communities. So if I’m right or wrong, my philosophy is to only invest as much as I can afford to lose (not financial advice).
Even though I was following crypto during the last bull run of 2017, I’ve been thinking back and couldn’t pin down exactly what caused it to end. There was a lot of discussion about a dip due to lunar new year 2018, rumors Korea would ban cryptocurrency, and exchanges allowing futures. All of those could have contributed to the crash, but I think the real reason was people were overinvested during altcoin season and a major correction scared away many investors. I see many parallels between 2021 and 2017 so let’s revisit some major events.
DISCLAIMER: I’m not a financial advisor. These are my opinions alone and you should not take financial advice from a random person on the internet.
When exactly did the last crash happen?
This is a graph of the market cap at the height of the last bubble.
It might be difficult to see in the picture, so I encourage to look for yourself on Coin Market Cap. The peak happened on 01/07/18. In the three months prior, the market cap grew from $151B to $830B, up 450%. By the next day, the market cap was at $683B or down 18%. Here’s the thing, in crypto these wild corrections happen frequently. I don’t think anyone at the time knew that a new ATH wouldn’t be reached for years, especially not in January 2018. Most coins were doing fine. “Buy the dip! HODL! You don’t lose if you don’t sell!”
In less than a year (12/15/18), the market cap was under $101B, a drop of 88% from the ATH. As I’ll explain later, it took awhile for most people to accept this correction was different.
Key events leading up to the 2018 crash
A few weeks prior to the market cap ATH, Bitcoin experienced its ATH and had a major correction. People started reinvesting into altcoins, many seeking to get rich quickly. It’s true - many coins rallied hard, but one major coin rallied the most and when it crashed on 01/07/18, a lot of new investors lost money. Enough people were spooked that the whole market took a downturn. Let’s go into detail:
Bitcoin ATH
Bitcoin was the first cryptocurrency ever created and most likely the first cryptocurrency investors ever heard of. It has always been the most invested coin in the market. Traditionally, if bitcoin is not doing well, the market is not doing well.
BTC reached its 2017 ATH of $20k on 12/17/17, weeks before the market peaked on 01/07/18. Here is the price of BTC around the crash. Notice, the crash was spread over several day, reaching its lowest for a while at $12k on 12/22/17. BTC was down 41% and the suicide hotline was posted on the r/bitcoin for the first time in 3 years.
BTC reached its 2021 ATH of $64k on 04/14/21, a few weeks ago. Here is the price of BTC around the crash, again notice the crash looks more gradual than you might expect. The lowest since the 2021 ATH was on 04/25/21 at $47k, a drop of 27%.
This 27% correction was not as strong as the 2017 BTC crash of 41% but I believe it’s the biggest dip in the past 12 months. Moreover, I believe the magnitude of BTC and overall crypto market dips have been decreasing over time. So just because it wasn’t a 40% dip doesn’t tell me that it wasn’t a catalyst for something more. Just as in 2017, the BTC crash ushered in the start of altcoin season.
Bitcoin dominance falls
Bitcoin dominance is the percentage of Bitcoin being traded relative to the rest of the market. During the 2017 BTC ATH, Bitcoin dominance was at 54%, only to drop to 43% during the dip and it kept dropping to 34% by the market ATH on 01/07/17. During the 2020 BTC ATH, Bitcoin was at 54%, only to drop to 49% during the dip and it has continued to drop to 41% at the time of writing. Again, it didn’t drop as badly as it did in 2017, but I still think the market’s ATH was yesterday, 05/11/21. For context, look at the dominance at the end of last bull market up until now. Notice how fast it fell then and how it’s falling now.
Personally, I don’t think BTC has to stay over 50% for eternity, but during this cycle it has me worried.
Altcoin Frenzy
Everyone wishes they bought BTC in 2013 and didn’t sell. They’d be millionaires! So when people lose faith that BTC will make them rich, they discover other cryptocurrencies known as altcoins. During this process, people see the opportunity to buy into the “next BTC”, a coin that’s either new or has so much room to grow. Afterall, if BTC was worth pennies at one point, why can’t MYALTCOIN reach the moon.
Coin Market Cap lists the dominance of the top 10 coins and labels the dominance of all the other coins as “Other”. On 01/07/18, “Other” was at 27%. Today, has been fluctuating between 18 and 24%. This tells me that now, like in 2017, lots of money is being thrown into coins that won’t survive the next bull market. Some coins do, but even the top 10 has changed a lot. On 01/07/18, the top 10 coins were — BTC, XRP, ETH, BCH, ADA, XEM, LTC, TRX, XLM, MIOTA. Today, the top 10 coins are BTC, ETH, BNB, USDT, DOGE, ADA, XRP, ICP, DOT, BCH. Only 4 are still top 10.
During the bull run of 2017, altcoins had phenomenal ROIs. However, many people that joined late managed to pump a certain altcoin in the endgame of the bull run. That coin became a top 5 coin and when it crashed, it left behind a sour taste in the market. That coin was XRP which managed to climb from $0.25 to $3.84 in less than a month making it the #2 coin. Do I remember any top 5 coin pumping like crazy recently?
I’m talking about Doge Coin (DOGE). In one month, it went from $0.06 to $0.73. I’m not saying DOGE or XRP have no fundamentals nor that they won’t survive the next bear market, but their pumps were insane! XRP and DOGE saw a 30 day growth of 1400% and 1100% respectively. Most of those investors were new investors and new investors frighten easily.
New investors frighten easily
XRP reached it’s ATH on 01/04/18, dipped, had a good bounce back, then had a major dip on 01/07/18.
DOGE reached an ATH on 05/04/21, dipped, bounced back to a new ATH on 05/08/21, and has been dipping ever since.
DOGE’s dip is probably due to the hype over SNL night. Buy the rumor, sell the news. XRP…I don’t remember why XRP dipped… but it doesn’t matter so much. Any coin that has so many new investors pumping it up will experience a major correction. So the reason and dates aren’t too important, each were due for a correction. But major corrections are commonplace, why was this different? In my opinion, it’s the fact that a major coin had so many new investors that a big correction makes them wary to reinvest. With each new rally closer to the ATH, new investors wish they reinvested. But with each subsequent correction, more investors lose hope.
The crash
In 2018, XRP and the whole market fell together, both crashing on 01/07/18. In 2021, DOGE’s ATH was on 05/08/21 yet the market experienced a new ATH on 05/11/18, yesterday.
On 01/07/18, the market crashed 18%. From yesterday’s ATH to today’s low, the market crashed 18%.
Any crash is recoverable from, but the majority of the market has to be confident in its ability to recover. However, this overall market correction occurring so close to when new investors might be discouraged might have more investors lacking that confidence. From a one day correction, it’s not clear whether this is the start of the bear market. Over the next few days and weeks, I believe the confidence will continue to fall and it’ll be made more clear.
But this time is different!
I’ve shown the parallels between the last bull market and this one. History is not guaranteed to repeat itself. The biggest reason why this time might be different is the amount of institutional investment that’s occurred. If big investors drive the market up, confidence is re-instilled into everyday investors. However, this is not sustainable. Prices cannot drive up indefinitely. If this cycles ATH wasn’t yesterday, it’s soon.
Also, the stock market has tons of institutional investments and it still encounters huge corrections. Just as the stock market always recovers, I believe the crypto market will too. I also believe this next bear market will be different in that it’ll be shorter.
Should I HODL?
With the stock market, it’s always been the case that an index fund will recover. So as long as you don’t sell, you don’t lose money. With crypto, most investors aren’t trading index funds, they buy individual coins. So historically, BTC has been the best coin to HODL as each new bull market brings new ATHs. The same cannot be said about all cryptocurrencies. Some coins like ETH, ADA, and LTC plummeted during the bear market yet reached new ATHs during this bull run. Other coins like XRP, XLM, and TRX had good run ups this cycle but did not beat their previous ATH. Some coins never recovered from last cycle.
In case I bought at the top of this market and I don’t mind waiting a few years, there’s still a chance I might never profit. XRP at its highest this cycle is about 50% down from last cycle. Again, not financial advice but for my own belief is not invest more than I can afford to lose and to invest in projects I have researched and believe in.
Should I buy the dip?
It’s so hard to know whether is just a regular dip or the start of a bear market. I turned to Redditsearch.io to look back in time at what they crypto community was saying during the crash. The goal is to give you a sense of what the sentiment on Reddit is like when most people haven’t realized the bull run has ended. Feel free to do your own searches, I acknowledge I’m partially cherry picking but that’s mostly because a lot of posts aren’t about the market as a whole and about individual coin news. I honestly didn’t see a lot of FUD when I searched even though hindsight tells us they were on a sinking ship. These are from r/CryptoCurrency, each date includes highest market cap that day.
01/07/18 $830B
Title: It drives me nuts that I can’t invest in more
Comment: 2018 is the year of the doge
Post body: For you baseball fans here It appears to me that we are roughly in the 3rd inning of a 9 inning game here (give or take an inning or two). When the market cap hits 4 trillion, I’ll be looking at pulling some of my profits off the table
01/08/18 $758B
Title: why I dropped 50k on vechain and why you should too
Picture: Go to the Winchester, have a pint, and wait for this all to blow over
Comment: After a dip prices go higher then never before. Based on what I haave seen.
Comment: Yep happens time to time guys do not panic
Comment: What dip to buy tho… It’s like Christmas again!
01/10/18 $734B
Title: What we have seen is not a crash its a correction
Title: Capitalize on the dip this is the best lowcap crypto to buy right now
01/12/18 $748B
Title: Why 2018 is ethereum's year. It will be the unchallenged number 1 by year’s end
Title:portfolio is allready near ath again
Titel: great news from south korea
01/14/18 $722B
Title: Living and explaining the virtue of HODLing when staring at a sea of red
Title: ELI5 why the bubble will NOT burst before the year ends
01/16/18 $652B
Title: hi suicide hotline. I made x60 this year instead of x100. My life is over!@#!@!!
Title: Why I’m bullish on Dogecoin for 2018, Even After This Correction
Post body: Sellers will then put that profit straight back into bitcoin causing it to skyrocket like we’ve never seen before. DO NOT SELL, in fact buy MORE. In the next few weeks we are going to see the largest bull run in the history of crypto.
01/28/18 $598B
Title: The bulls are back baby and ethereum is taking over
Title: lots of people think eth will hit 5k this year
02/05/18 $384B (Down more than 50%)
Post body: The prices r ridiculous. It hurts to watch. My portfolio went straight to the drain. But hell what is my goal in this game?
comment: I’m just really bummed I don’t have a spare couple of grand to or into more right now
03/05/18 $472 B
Title: My prediction why a bull run is near? The whales want it to happen and history agrees!
04/05/18 $257 B
Title: Which coins are currently extremely undervalued
05/05/18 $469 B
Title: Want to know why we are more stable today than ever before?
TL;DR
BTC crash in 2017 caused new investors to FOMO into altcoins. XRP was a top altcoin that blew up. Within weeks of BTC crash, XRP dipped and so did the market.
BTC crash in 2020 caused new investors to FOMO into altcoins. DOGE is a top altcoin that blew up. Within weeks of BTC crash, DOGE dipped, so did the market two days later.
Reddit refuses to believe they’re on a sinking ship. Always shilling coins that will moon soon. Always saying to buy the dip. Always saying to HODL.
It’s hard to know when we reached the top of a bull run, and if it hasn’t happened yet, it will happen soon.
Some coin will not survive a bear market. I only invest what I can afford to completely lose.
This is not financial advice!
