tl;dr : they're both moving towards the right
This is a follow-up to an earlier post comparing Bitcoin's previous cycles to today. Credits to u/Mutchmore for the initial idea. The chart compares the market cap among all cryptocurrencies relative to time. It uses a logarithmic scale, meaning the growth is proportional (i.e. the growth of $1 to $10 is equal to the growth of $10 to $100). The 20-21 market is green, the 17-18 market is red.
Side by side comparison of 2017-2018 and 2020-2021 chart
Total Crypto Market Cap by TradingView
- I took the chart snapshots from the respective halving periods of BTC: July 9, 2016 and May 11, 2020. "Why use BTC as a reference for a cycle of global cryptocurrencies?" Because there's no definitive starting point for these cycles, and one is needed to limit biases.
- There are only two available data sets since the data only go as far as 2014. This is also a visual analysis, one of the weaker types of analysis. So take this analysis with a pinch of salt—it's not enough for any definitive assumptions.
- The cycle comparisons start at the most recent halving on May 11, 2020. As of today, we are ~370 days in the current cycle, with a total market cap of ~2.3 Trillion.
Key Takeaways (ELI5)
- Metcalfe's law that states that the cryptocurrency market will grow relative to the growth of investors. Hence, the use of a logarithmic scale.
- The law of diminishing returns in markets that states it's much harder to grow the larger you get.
- The 20-21 cycle is still 50% – 70% of the 17-18 cycle in both growth percentage and number of days.
- Bullish: The 17-18 bull run saw the total market cap grow from ~$10B to ~777B: a growth percentage of 7,670%. The 20-21 bull run started at $230B and today, halfway through, we are at $2 trillion; using the same growth percentage would project a ~$17T market cap.
|Global Crypto Market (2018)
|Global Crypto Market (current)
|Global Crypto Market (projected)
|US Stock Market (as of 3/31/2021)
- Assuming currency dominance (BTC: 39% ; ETH 20%) stays as it is, this would project a ~$360,000 Bitcoin and a ~$29,500 Ethereum. Of course, these numbers use rather lofty assumptions and are unlikely outcomes. But, it does provide a decent maximum projection. Note: this projection would dwarf even the most ambitious projections such as Plan B's $288k Bitcoin and double modest projections such as the log rainbow at ~$150k by October.
- Taking diminishing returns into consideration would indicate a ~$10 – $7T market cap. Still under Gold, but those are some pretty good returns!
- Bearish: I've mentioned before that the 20-21 market is outpacing the 17-18 market for many reasons including COVID-19, fiat inflation, institutional involvement, and others. And that the law of diminishing returns suggest that should not happen. If your outlook is bearish, this could indicate that we're in a bubble and would either have a correction soon or be in a consolidation period for a few months. The latter is sort of happening now based on the last few weeks.
A lot of people like to compare the 17-18 cycles based on sentiment alone. This post just provides a different perspective. Of course, "you cannot use the past to predict the future". This is, by no means, an attempt to predict the market; so take this with a pinch of salt based on your preference. Salt makes everything taste better; too little makes things bland and too much can kill youTM.
submitted by /u/M00OSE