Many participants in the cryptocurrency market are certainly interested in when the bear cycle will end in the cryptocurrency market and explosive growth will begin again, as in 2017.
For example, Mike Novograts believes that the rise in the market will begin in early 2019, and its main driver will be the arrival of institutional investors.
“I don’t think it breaks $9,000 this year,” Novogratz said
Blockchain Capital partner Spencer Bogart is sure that Bitcoin has almost reached the bottom, which means the growth phase is very close. It seems that venture investor Tim Draper doesn’t worry about the current stagnation at all: he is convinced that over the next 15 years the market capitalization of cryptocurrency will reach 80 trillion US dollars.
The situation in the markets is periodically repeated and this can be found both in local laws on price charts and in long macroeconomic cycles. The fluctuations of economic activity in the form of spirals consisting of downturns and rises, were described in the late XIX – first half of the XX centuries.
Among the main elements of the theories of cyclicity can be identified:
Kitchin’s short-term cycles (2–4 years);
Jugglier’s medium-term cycles (7–11 years);
Kuznets rhythms (period 15 – 25 years);
Kondratieff long waves or K-cycles (period 48 – 55 years).
The reason for the emergence of cycles in the economy can be different circumstances: the emergence of new technologies, changes in prices for raw materials, force majeure situations, seasonal factors, unemployment, and much more. Regardless of these variables, all economic cycles have a similar structure and consist of the following phases:
- rise (recovery, expansion)
- peak (highest point of economic recovery)
- recession (recession, crisis)
- bottom (depression)
Cyclicity is a form of progressive development. Therefore, despite the change of phases, a long-term growth trend is typical.
One of the varieties of cyclical development is called the “economic bubble”. The pronounced cycle with a parabolic, manipulative price rise before the peak attracts the attention of many market participants, media, politicians and mainstream economists.
For many, the most important and difficult question now is to determine the current phase of the cryptocurrency market. Have we reached the local bottom or is it even lower?
Let’s try to analyze the previous crises. Of course, the analysis will make only a few assumptions.
So, from the point of view of the amplitude and growth rate of the cycle, Bitcoin has long overcome even tulipmania:
However, let’s try to compare the Bitcoin chart with the latest economic bubbles. The closest in time and most similar in essence and cause of (technological) is the crash of the dot-coms. The NASDAQ index then lost 78% in 30 months, showing the canonical structure of the bubble.
The economic bubble in Japan in the 1990s also showed a decline of around 80%. If we take this figure as a guide, then we get an interesting picture.
On the BTC / USD chart, a similar decline should bring the quotes to $ 4,000. And if we look at the crypto market in terms of its total capitalization, it should fall from $ 830 billion to $ 165 billion. Last month, capitalization was already dropping below $ 190 billion, so the bottom of the current cycle is probably closer than it seems.
On the cryptocurrency market, bubbles periodically appear, which are an ordinary part of the economic cycle. It is impossible to determine the current phase of the cycle. However, with a certain probability it can be noted that the market is approaching the bottom, which means that over time the trend will change. At the same time, the new trend, most likely, will not be highly volatile or parabolic, but relatively calm. Cryptorok depends on the global financial market. This means that the likely start of a new global crisis will be a serious test for him. The cryptoindustry has a lot of risks. For example, periodic suspicious activity on Bitfinex and the situation around Tether; hidden network vulnerabilities or their appearance in the following updates; decrease in profitability of mining; threat from quantum computers, etc.