The shattering of the cryptocurrency bubble

12 May 2022

Since November 2021, the total market cap of cryptocurrencies has started to decline. Indeed, it has declined approximately 60% until now; meanwhile, the selloff has accompanied this in more than 20 000 cryptocurrencies. Moreover, volatility remains highly elevated, and short-lived bounces in the price of tokens, followed by fast crashes, suggest anxiety among market participants. These are particular signs of the downtrend, which is poised to continue further. Technical and fundamental factors support this view. All - daily, weekly, and monthly time frames - remain bearish. Additionally, altcoins experience outflows of capital, while Bitcoin sees capital inflows. That hints that people are flocking to Bitcoin from other riskier coins. At the same time, the prospects of higher rates in the U.S. and around the globe pose threat to the purchasing power of cryptocurrencies. Therefore, our outlook is very bearish and we voice a word of caution to the market participants.

*additional ideas in which we detail how we navigated the current downtrend are attached below the idea

ATH of the total cryptocurrency market cap = 3.009 trn. USD (10th November 2021)
The current value of the total cryptocurrency market cap = 1.217 trn. USD

Illustration 1.01

Illustration 1.01 portrays the total cryptocurrencies market cap excluded BTC.

Illustration 1.02

The picture above shows the dominance of BTC. It can be seen that its dominance has started to increase as other altcoins started to puke.

Illustration 1.03

Illustration 1.03 shows the daily chart of BTCUSD. It also shows how it correlates with the total cryptocurrency market cap. A strong positive correlation is shown.
*A strong correlation can be observed also with the tech sector which experiences "tech winter".

Illustration 1.04

The illustration above shows LUNA (against USDT), a popular stablecoin that gained a lot of press within the past few days due to its sharp drop of more than 99%. This event foreshadows more similar events to come in cryptocurrencies that lack any other use than speculation.

Illustration 1.05

Bitcoin has entered the "free-fall area" - an area with the absence of support.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.