When Will Cryptocurrency and Decentralized Finance Markets Rise Again?

Cryptocurrency markets appear to mimic the trends of the past, but users should always be on their toes. The current lows could make way for new highs.

By
Robert D. Knight
on
July 18, 2021
Category:
Blockchain News

No Denying The Slump

Crypto markets are currently in a slump. The price of bitcoin now less than half of the $64,804 high watermark which it hit in April.

The total value locked in Decentralized Finance (DeFi) has suffered a similar fate, down to $54.56 billion on Ethereum from around $90 billion in May. 

At the same time, the NFT market seems to be following a largely similar pattern. May was a record-breaking month for the sale of NFT artworks, but the market declined by 90% in June.


Aug 2020-present: Bitcoin price chart (left - source: CoinGecko) and Total Value Locked in Ethereum (right - source: DeFiPulse)

You don’t have to be crypto-prejudiced to think that all of these charts are beginning to look the same, and not in a good way. The question this raises is whether this is the end of the current bull run, and if so, when will the markets rise again?

Lessons From History

To gain some insight into the present, it pays to be aware of the past. The last crypto bull run began in earnest in early 2017, fueled by crypto crowdfunding of initial coin offerings (ICOs).

This ‘ICO mania’ was not to last, and by early 2018 the price of bitcoin crashed. At that point, the last great crypto bull run was mostly at its end, even if some of the heat and steam from the market had yet to dissipate fully. 

There were several positive signs in early 2018 that would allow anyone to reasonably speculate that the crypto market was still in good health. The first three months of 2018 saw ICOs raise more capital than in all of 2017. 

A total of $6.3 billion was raised from ICOs in Q1 of 2018, smashing all records, representing a 118% increase from the previous year's total. According to the Bitcoin price in early 2018, the market was already failing, while the ICO data showed that the market was stronger than ever.

In the end, it was BTC that proved to be the more accurate indicator of market sentiment and health. 

The lesson from history is not that BTC will always be the best indicator of market health –– although it has proved to be reliable in the past––but that any one indicator in isolation may paint a skewed picture.

One other thing to consider is the similarities between the end of that bull run and the present market conditions. Speculation in the ICO market brought increased regulatory interest, and the assessment of regulators was rarely favorable.

The SEC alone brought a considerable number of legal cases against ICOs, including Telegram’s $1.7 billion raise (which they later had to pay back), and regulators from around the world followed suit.

A sample of investor alerts and legal cases from the SEC


The Recent Bull Run

The latest crypto bull run has its roots in a market that began to recover over early 2020. The market then exploded later in the year and through 2021 until it fell away in mid-2021. Bitcoin hit an all-time high of $64,804 in April, but now sits around the $31,000 mark. 

While the last crypto bull run was fueled by ICOs, this time it has been DeFi, and more lately, NFTs. These have provided the sustained upward lift. It’s easy to make comparisons between the two and the previous altcoin-fueled bull run of 2013.

Litecoin creator Charlie Lee was one of the many to draw the parallels between this bull run and previous ones.

In a Tweet, he said: “I see a lot of parallels between 2021's NFTs with 2017's ICOs and 2013's altcoins:

- easy to create new ones with no barriers

- simple to understand & explain

- brings tons of new people into crypto

- high prices & pumps create hype/FOMO

- few will hold & have value, most won't.”

April 2017-present: Bitcoin price chart (source: CoinGecko) from the 2017 bull run to the most recent example.


An aphorism which is often ascribed to Mark Twain states, “History never repeats itself, but it does often rhyme.”

Looking at the current state of the crypto market it does seem as though history is rhyming just a little. Price data and charts look eerily similar to that of 2017. Google analytics shows that searches for ‘Bitcoin Price’ have reached a 7-month low

Regulators worldwide, including in Japan and the UK, are giving Binance a torrid time, all while, Changpeng Zhao tries to put a positive spin on it. Increased regulation naturally brings challenges.

The Good News

The good news for crypto is that the general health and strength of the cryptocurrency market are far healthier than they were in either 2013 or 2017. While there were 4 long years between bull cycles in 2013 and 2017, it only took around 2-3 years until the market next recovered.

Even if - and that is not entirely certain - the market is entering a more bearish period of slower growth, it is likely that the next recovery will come even more quickly than the previous two cycles.

Crypto now has massive strength in depth: entire thriving ecosystems such as Binance Smart Chain (BSC) did not even exist in 2017. That then brings us to the question of when the cryptocurrency and DeFi markets will rise again?

The answer to that question is slower than you’d like but faster than you might expect. 


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Robert D. Knight

Robert D. Knight is an experienced journalist and copywriter who has been working in crypto for 4+ years. His bags are heavy and he also hodls some cryptocurrency.

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