Is the Crypto Bull Market Over?

Last year was a great year for Crypto. It was one of those big bull markets we see every now and then where the massive gains make up for years of under-performance in a short space of time and new highs are reached. In 2021 we saw Bitcoin hit a peak of over $63K USD in April and then another big peak of over $67K in November almost exactly 6 months later. Some might try and call it a “Double Top” and if you look at the short term trend over the last 2 months where Bitcoin is almost 40% off the second peak you’d be forgiven for thinking the next bear market had started….

But this is no traditional market. This is Crypto – where volatility is normal and common sense is easily overwhelmed by sentiment. Standard rules don’t really apply, so if this is not a bear market then what really is going on? I personally consider this to be just regular volatility. Crypto has become somewhat correlated to other “Risk On” markets and has got itself tied up in the “Everything Bubble” where all assets seem to ebb and flow with the broader sentiment of more traditional markets. Take a look at the Nasdaq, for instance. An index that is made up of mature technology stocks (non Crypto). It’s also peaked in November and has been steadily trending down ever since. Sure, it’s not as volatile as Crypto but the pattern is the same.

Now is this a bad thing? Well, yes, it could be. With the Federal Reserve (among others) now pretending to care about rising inflation and threatening to actually do something about it by “Tapering” (raising interest rates) we could very well have a major asset market meltdown in the very near future and Crypto won’t be immune to that (at first). So that’s my disclaimer – If the legacy financial system has a meltdown (deflationary crash) then Crypto is going to get hammered. But let’s assume for a moment that good old Uncle Joe (and his handlers) is going to want to keep those markets propped up before the mid-term elections and the punchbowl isn’t going to be taken away from the casino just yet….

The Fundamentals for Crypto are just simply outstanding and they are getting better all the time. With all the money printing and currency debasement going on, with all the new technology developments in the Crypto space and with a lot of bigger corporate players (even banks) looking to now get into the space, the party for Crypto in the macro-sphere is long from being over. Sentiment is still the main driver of the market short term and at the moment it’s admittedly a bit wobbly, but sentiment can turn on a tweet from Elon Musk, so you have to put it aside sometimes – or at least be aware that sentiment really just should be signaling buying or selling opportunities.

That’s where I think we are now. We are in a situation where the Fundamentals are strong and Sentiment is sagging and we’re probably only one sharp rally away from a breakout of the Technical downtrend of the past 2 months. For me this means it’s a good time to do some rebalancing of my Crypto Portfolio to get ready for the next leg. What I’m looking for is strong projects that might have missed out on the last run up. Ideally projects with some maturity and actual Use Cases being realised. These projects are the ones where Speculation is low and the initial Hype has worn off. That’s where the value is because I think that alt-coin season is just around the corner....

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