Three Reasons Why the Bull Market Is Not Over
Three Reasons Why the Bull Market Is Not Over
Why the -50% correction was essential for the bull market to continue
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Hey DEFI TIMES community,
The last few days have been tough - the current market sentiment is determined by a single emotion: extreme fear!
Bitcoin is down significantly from its previous all-time high, which is the main reason people are fearful. Corrections are normal in bull markets - we usually see 20-30% drawbacks every few weeks.
However, this time feels different because Bitcoin has dropped by over-50%. Such a large correction usually indicates that something is wrong. The last time we saw such big moves was in March 2020.
So, many people ask themselves whether we are potentially entering a bear market. There’s nothing wrong with that question. Especially if you are new to crypto, you are overwhelmed by the noise on Twitter.
Today, I want to separate the noise from the signal and give you three reasons why the bull market might not be over quite yet.
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Three Reasons the Bull Market Is Not Over
1. The Ethereum Ecosystem is Flourishing
First of all, the latest price crash was a real stress test for every Ethereum-based protocol. Why? Sudden price crashes cause liquidation waves. When leveraged positions become under-collateralized they have to be liquidated. This causes the price to crash even more and the cycle continues.
In March 2020, MakerDAO was stress-tested because DAI’s collateral decreased significantly in value in a matter of hours. To cover all the positions, the protocol had to mint new MKR to pay for new collateral.
Interestingly, nothing like this happened during the flash crash - no problems occurred!
Ethereum is healthier than ever before…
This is not the only thing that is bullish for the Ethereum ecosystem. The future looks extremely bright for Ethereum. Not only the long-term future but also the immediate future. We have a number of updates in the pipeline we have been working on for years now:
EIP-1559
Optimistic Rollups
The Merger
All of them are going to go live in 2021. While EIP-1559 and Optimistic Rollups are going to launch already in July, the merger is expected to happen by the end of the year. The next six months are packed with updates. Not only on the blockchain level but also on individual protocols.
There’s no denying that DeFi is growing at an insane speed - I see no reason why this would change. Even if we continued a bearish trend in the next few weeks and months, it would be only a matter of time until the market recognizes all the updates and improvements that are going to happen.
DeFi is on the verge of getting the world’s attention. By implementing Optimistic Rollups, we increase transaction throughput and lower gas fees. More people can join the ecosystem without sacrificing decentralization.
The last bear market happened because of a lack of updates and announcements… nothing really happened!
Considering all the growth taking place, I don’t see the bear trend continuing.
Remember: when the facts change, so should your opinion - the facts will change in 2021.
Prices can keep going down but DeFi will continue to go parabolic.
This is not a bear market environment.
2. Weak Hands Left the Market
Every crypto bull cycle brings in 10x more people; however, crypto is extremely volatile and not everyone manages to bear the price fluctuations. People, who are new to crypto, are the ones causing such significant sell-offs.
They think crypto-only goes up - a very dangerous assumption to make. They over-leverage their positions and pump up the prices until a correction happens.
Leveraged positions get liquidated and the correction washes out greedy newcomers.
The more leverage is in the system, the larger the correction. The larger the correction, the more people leave the market and prices return to a sustainable level. That’s exactly what happened last week!
Take a look at the NUPL chart: more than half of Bitcoin addresses are at a loss!
When most addresses lost money on paper, people might refuse to sell their assets. Why should they? We are still in a bullish trend, and there is a very real possibility that those addresses will be able to sell at a profit in the future.
While new people left the market already, more experienced participants stabilized the price.
3. The Macro Environment Didn’t Change
Last Friday, we made the point that nothing changed in the crypto market:
Tesla still holds their BTC
China didn’t impose new crypto regulations
In addition, the macro environment also stayed the same. Central banks continue to print money like never before. They keep interest rates low to artificially adjust supply and demand.
Money printing is the ultimate reason why people invest in bitcoin!
Bitcoin doesn’t allow us to print money out of thin air - new bitcoin are issued according to predetermined rules. There are no bailouts: 21 million coins - that’s it!
Bitcoin is a way to make the world a fairer place. The USD stands for injustice and corruption. Bitcoin stands for justice!
The bullish environment for Bitcoin stayed the same. Just as the FUD is over, people will remember why they invested in Bitcoin in the first place: to make the world a better place. To stop money printing and inequality.
That’s the bull case for Bitcoin - and nothing changed about it!
Conclusion
The correction has been brutal and washed out many newcomers. They realized that crypto doesn’t only go up!
Thousands of people learned the hard way that this is the most volatile market in the world.
But remember risk = opportunity!
Paper losses are the cost you pay to catch this once-in-a-lifetime opportunity! Most people can't handle that!
In my opinion, all the Ethereum updates coming up are not a bear market environment. The crypto markets were overly leveraged - that’s it! The leverage needed to leave the market, and some corrections are more brutal than others.
Not only is the DeFi ecosystem thriving, but also the monetary policy provides a perfect environment for cryptocurrencies. It’s the reason why we invested in Bitcoin in the first place.
Separate the signal from the noise… and you will succeed in crypto!
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DISCLAIMER: All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.