market cycle
"History doesn't exactly repeat itself, but it often rhymes."
Looking back at previous cycles can help you understand what to expect next. Although it is not guaranteed to be exactly the same, it can let us understand the rotation of capital.
We are currently in phase one - Bitcoin.
It’s the early stages of a bull market and all liquidity is being drawn into the safest asset of all – Bitcoin. BTC has the lowest downside risk among the more volatile asset classes, and combined with possible ETF approval and the halving, there is huge potential for growth.
BTC Dominance
We can measure and visualize this capital rotation cycle by examining the BTC dominance chart.
BTC has been in a strong uptrend since September 2022, forming a series of HH+HL (lows no longer lower; highs higher), indicating a bullish trend.
Bitcoin’s current market share is 55%, a multi-year high.
The next level to watch is around 58-60%, as this range has previously acted as a support and resistance area.
Eventually, BTC.D will reach a cycle peak and begin to fall back. As risk appetite rises, capital will move to ETH → Large Caps → Altcoin.
ETH/BTC
Another important chart to look at is ETH/BTC.
ETH has been underperforming since December 2021. Shown as a downtrend and a series of LL + LH (the highs are no longer higher, but the lows are lower).
When ETH/BTC bottoms out and begins to recover, the second phase of the market cycle begins.
Stablecoin inflow
Since 2022, stablecoin market capitalization has been on a strong downward trend. This is consistent with the capital exit space and consistent with the characteristics of a bear market.
However, we may be seeing signs of a bottom forming.
・October 2023 = USD 124 billion
・December 2023 = USD 129 billion (+5%)
Bull market = stablecoin inflows.
Extended reading: Current status of the stablecoin market: USDT is a steady winner, and exchanges consistently show an inflow trend
DeFi TVL
TVL is often considered a lagging indicator. However, it is still useful for studying and understanding overall trends.
TVL has been range-bound since June '22. However, we have seen a good upward trend since October.
・October 2023 = USD 36 billion
・December 2023 = USD 50 billion (+39%)
Extended reading: JPMorgan Chase questions: DeFi/NFT "recovery is an illusion", Ethereum's progress is lagging behind
retail interest
Once your friends and family start asking if they should buy cryptocurrencies, that's usually a good sign of a spike.
Previously, Google search volume peaked in May 2021 after Bitcoin hit $64,000. But for now, retail interest in cryptocurrencies remains low.
Summarize
It's easy to get carried away by the recent market rally and think: Gee, I'm not even buying yet.
As a result, "Fear of Missing Out" (FOMO) spreads inside you, and you feel like you are one step behind the market.
Take a break, change your focus, and look at the information.
We are only in the first phase of a bull market.
Now is the time to focus and double down on your research. Let us work together, and in a few years, I firmly believe that the market will bring us gains beyond imagination.
