The crypto bull market has been facing a correction but that does not mean that Bitcoin is facing a bear market like people want you to believe.
Bitcoin has been fluctuating as it normally does, and we have already seen a big move down, which sent the media in frenzy only for the currency to have a small recovery since then. As I’m writing this, it is trading at around $34,500, but we know how quickly that can change. We have all seen the crazy price targets that have been thrown out there but let’s not get ahead of ourselves here. Bitcoin has reached new all-time highs over $40,000, and even Ethereum reached a new all-time high yesterday at over $1,400. There was bound to be a correction since nothing goes up forever, even though the people that scream “to the moon” would like to believe that.
However, with the Biden presidency having officially begun today, it is time to buckle up and get ready for the ride. There are several factors that have been happening recently that have to be taken into consideration. So let’s go through these.
The madness surrounding the printing of the U.S Dollar
As you might be aware by now, the U.S. dollar is the world’s reserve currency due to the Bretton Woods Agreement that took place in 1944, which meant that nations pegged their currency’s exchange rates against the U.S dollar. This is not still active today, but it has nonetheless left a long-lasting effect on the economy today since 60% of global exchange reserves belonging to foreign countries are still pegged to the dollar.
Now, you might wonder why this information is relevant. Because in the year 2020, 22% of the circulated U.S dollar was printed, and the federal reserve has been absolutely running the money printer into overdrive to save the economy. To provide you with some context, the dollar has existed since 1792, when it was created by the United States Congress. The incredible thing in this money printing is that it does not seem like it will stop for now either, with Biden taking his presidency, he called for $1 trillion as a direct relief to the taxpayers in need, which involved increased stimulus checks.
As the dollar keeps losing its value as the global reserve currency, investors will continue to lose faith in the currency and diversify into markets such as cryptocurrencies and precious metals such as gold and silver. With the Biden presidency now in full effect and the money printer going into overdrive, expect the market to react accordingly.
The end is not near and the bubble is not about to pop
Calm down, we know that the majority of the people were saying, “I told you so,” and media outlets like CNN were going crazy when it dropped down to $31,000 and stated straight away that it was now in a bear market. This made a lot of people panic sell their assets while watching the currency fighting its way back up again. This has especially happened to newer investors in the crypto market. So congrats, people, you survived the bitcoin bear market of 2021.
Jokes aside, the more experienced crypto investors would know that this so-called “crash” was not a big deal, and most even expected it. Everybody that is not used to price fluctuations and corrections should repeat this line every night before they go to sleep in order to sleep well at night: “Corrections are a healthy part of a bull market.” Even the people that have price targets of astronomical values, such as the price target of $400,000 by the Winklevoss twins, would probably want it to grow in a healthy way during this bull market instead of shooting straight up because that would be a clear definition of a bubble. Even though we love our stonks, there still has to be a sense of reality involved as well.
The Whales have entered the party
For those of you that might not be aware, a bitcoin whale is someone that holds a large amount of the cryptocurrency, which can be problematic at times since it can affect the currency. Yet, the crypto bull market is accumulating whales like never before and it is going under people’s radar. So while you are panic selling your bitcoins, which is exactly what institutions want you to do, the whales are accumulating more bitcoins exponentially, and you can bet that institutions make up a big part of that. It looks like people are preparing for a next run where the next price target would most likely be 50,000 dollars.
Photo by Willy Woo on Twitter
The amount of liquid Bitcoin in the market is dropping at a steady rate
Since the market crash of march last year, the rate at which available liquid BTC has been declining steadily. So while wealthy individuals are acquiring more bitcoin, the liquidity of bitcoin itself is decreasing steadily, and since we all know that the amount of bitcoin available to the market is preprogrammed and the final supply will amount to 21 million.
The result is simple supply and demand, and you should know what that would lead to. The numbers are showing that 79% of the world’s bitcoin is illiquid, so there is currently around 4.1 million bitcoin left. While there are around 47 millionaires in this world, which says it all. There is a clear relationship between the liquidity of Bitcoin and the market, so that is something that you should pay more attention to. This can be seen in the graph below.
If you still think bitcoin is in a bear market, I guess now is the time to rethink. The term HODL has become infamous in the crypto community and, if you are not familiar, it more or less means that you hold on for dear life of your bitcoin, and I usually don’t like to advise that because it gives indications of a cult behavior, but in this case, it is quite clear what you should do. This should also resonate with the people that have not invested in bitcoin yet and are worried that they have missed the boat. Clearly, that is not the case, and there is still a lot of room for upside, so I guess you have a decision to make.
Alt season is not in full swing yet
The altcoins usually take off when bitcoins reach all-time highs as the bull market in 2017 and the alt season usually leads to the altcoins outperforming bitcoin. However, this is not in full swing yet, and the Altcoin index currently lies at 41, and there will be some exciting price action developing in that market going forward. Of course, this means that the altcoins will be outperforming the bitcoin, but as I mentioned before, it can’t keep going up all the time.
Photo from blockchaincenter.net
At the end of the day, we are not near the end of any bull market, so let’s see what the market has in store going forward.
As you probably can guess by now, I am bullish on the crypto market and have invested in it for the long term, honesty goes a long way, so being open with it is for the better.
Lastly, I want to clarify that even though I am a finance professional, this is not financial advice, and this article is only meant to bring light to the current market situation. I advise everybody to do their own research, I only want to help you to find what you are looking for.