Why the next crypto winter won’t last as long as the previous ones
Bitcoin is currently trading at the $56243 level based on price data from CoinMarketCap and at this level in the market cycle, there are retail traders who may have become oblivious to the fact that a price correction may occur. After recovering from what was over a year-long crypto winter, Bitcoin changed hands, and HODLers book unrealized profits from 3-4 years ago.
Black Thursday in March 2020 was a reminder of the correction, however, in the current price rally, there have been more frequent dips of relatively lower magnitude – 20% or so. Crypto Twitter influencer @WolfofChainlink was quoted in his recent Twitter post:
I see a lot of you new crypto investors are oblivious to the fact that a #btc correction will come at some point & crypto will be in another year long bear market. At that time, most of crypto will correct 80% or more.
Don’t be a damn fool, take profit on the way up!
— WolfOfChainlink (@bullishgentlemn) March 20, 2021
Though based on BTC funding rates, Bitcoin’s price may rally further. However, if the options expiry, or future events that are expected to boost Ethereum’s price, and other DeFi tokens lead to a drop in investment flow in Bitcoin, there may be a correction. A correction, if it lasts longer than a month may have an impact on the investment flowing into Bitcoin from institutions as well.
The repeated institutional inflows from Square, MicroStrategy, Tesla, Grayscale have increased the volatility over the past 8 months, however, retail traders’ portfolio has been affected by the drop in volatility every few weeks. It is likely that institutional investors keep buying at lower price levels, however, long periods of rangebound price action in Bitcoin and low volatility limit the unrealized profits for retail traders.
There are more opportunities and double-digit returns on altcoins currently in the market cycle. Since Bitcoin accumulation by institutions occurred above the $48000 level, it is expected that there will be adequate support, however, in the event of a year-long bear market portfolios with over 20% Bitcoin holdings would have limited opportunities for booking profits.
Currently, 94% of HODLers are profitable and of the circulating supply 11% is concentrated by large HODLers. Additionally, just 3 days ago, Bitcoin’s volatility dropped to its lowest level historically. DeFi tokens and NFTs have grown in popularity to an extent that Google searches for NFTs have crossed Ethereum, and this is a lucrative option for investors and retail traders, taking away the liquidity from Bitcoin in the long term on spot exchanges with low trade volume.
Year-long or not, a bear market would have a significant impact on retail trader’s portfolio, and diversifying into altcoins with high market capitalization may be an opportunity for double-digit ROI in the following months