Bitcoin

3 Key Ways Bitcoin’s 2021 Bull Run may be different from 2017

After a long wait, the price of Bitcoin has finally returned to the same price range as it was 3 years ago. In 2017, when the price of Bitcoin (BTC) peaked at $ 19,900, most altcoins also saw weekly gains of 200% or more.

Fast forward to the present moment and the price of $ 19,100 for BTC is practically the same as it was on December 17, 2017. Anyone would think that despite a few altcoins that failed, not much has changed, but that couldn’t be further from the truth.

Daily view of crypto market data. Source: Coin360

Much has changed in the field of cryptocurrency, and Compared to 2017, a significant part of the required infrastructure has been built.

3 Key Ways Bitcoin’s 2021 Bull Run may be different from 2017
3 Key Ways Bitcoin’s 2021 Bull Run may be different from 2017

Today, strictly regulated derivatives are offered through the introduction of CME and CBOE futures contracts. And the rapid growth of institutional investors provides an inexhaustible source of demand for Bitcoin.

A new line of decentralized financial platforms (DeFi) with a market capitalization of billions of dollars has also emerged. They are supporting a new system of loans, synthetic swaps and interest income systems for a whole new group of investors.

Compared to 2017 There is a wealth of readily available data on price and market capitalization rankings. This should help investors better understand how the current market differed from the market in 2017.

We can better understand what the cryptocurrency market will be like in a few years’ time by analyzing the differences.

What has changed since 2017?

Top 24 cryptocurrencies in December 2017. Source: CoinMarketCap

When classifying cryptocurrencies by market capitalization, four of the five most important remained the same. Interestingly, the market capitalization is from Ether (ETH) and XRP are relatively the same at $ 69 billion and $ 28 billion, respectively. This movement occurred despite the fact that both cryptocurrencies have seen their prices fall 15% since December 2017.

This effect is caused by the issue of new coins. For example, The coin supply of ether increased from 96.4 million to 113.7 million. The equivalent inflation rose to 17.9% in three years. For comparison, The total number of Bitcoin in circulation increased 10.8% over the same period.

Apart from Bitcoin, Ether and XRP, the remaining cryptocurrencies in the top 20 suffered heavy losses. IOTA lost 91%, Bitcoin Cash (BCH) 84%, Litecoin (LTC) 73% and Cardano (ADA) recorded a loss of 70%.

The top 24 cryptocurrencies in December 2020. Source: CoinMarketCap

It is worth noting that Of the current top 15, the only newcomers are Chainlink (LINK), Polkadot (DOT) and Binance Coin (BNB). It should also be noted that Polkadot didn’t exist in 2017 or 2018.

On the other hand, Ether’s competitors like Cardano, EOS, NEO, Ethereum Classic (ETC) and QTUM appear to be losing ground. Last year they were replaced by interop tokens like Chainlink and Polkadot.

The current top 3 currencies BTC, ETH and XRP have a market capitalization of 448 billion US dollars, an increase of 7% in three years. Meanwhile, the remaining 21 executives have a capitalization of $ 77 billion, a decrease of 41%.

One would automatically assume that Bitcoin’s dominance has increased enormously at this point, but has only increased by 2% to the current 63%. This effect is only possible by adding hundreds of new tokens. The three outstanding sectors are exchange tokens, stablecoins and finally the decentralized financial sector (DeFi).

Institutional investors will influence prices in the future

As already mentioned, In December 2017 there were neither CBOE nor CME futures, let alone with relevant liquidity. The same goes for the praise and effective investments of institutional investors in Bitcoin.

More recently even the Larry Fink, CEO of BlackRock, seems optimistic that Bitcoin will become an asset class in its own right.

Derivatives give Bitcoin and Ether an enormous competitive advantage for the money of professional investors. Recent positive comments from the chairman of the US regulator, the CFTC, Heath Tarbert, you have brought the introduction of regulated ETH futures one step closer.

So, The likelihood of BTC and Ether investing decreases over time. In addition to its dominance in the derivatives markets The 97% concentration of BTC and Ether in Grayscale’s mutual funds provides insight into this theory.

Key factors that will affect the next bull run

Trying to predict massive market shifts in the future is an overwhelming and often ineffective strategy. However, some conclusions can be drawn from this comparison.

After the Lindy effect The life expectancy of some technologies is proportional to their age. and the longer they survive, the more it can be predicted that they exist.

When this paradigm is applied to the sector, One could conclude that the longer a cryptocurrency stays in the top 12, the greater the likelihood that it will remain relevant three years later.

For example, Bitcoin and Ethereum’s “killer” narrative was incredibly popular in 2017 and 2018 when it was predicted that competing blockchains would outperform industry leaders because of their faster performance. cheaper commissions and improved scaling or “real world use”.

While these stories may have sounded wise in 2017, Time has shown that the network effect remains. The best technology doesn’t always win.

Another unique phenomenon in the cryptocurrency sector that investors should know about is hard forks and codebase clones. In 2017, Bitcoin Cash (BCH), Bitcoin Gold (BTG), Ethereum Classic (ETC) and DASH were forked or competitive clones were released. They initially thrived, but a review of their price and market cap shows that their success was short-lived.

The total supply of coins and the issuing rate of a cryptocurrency can also influence its price development. High emission cryptocurrencies can struggle to catch up in price. These include XRP, Chainlink (LINK), Polkadot (DOT), Stellar (XLM), Tron (TRX) and Tezos (XTZ).

Although each of these has many compelling real-world uses and impressive associations, The massive supply of currencies hinders strong upward price movements.

The electricity powered by retailers will almost certainly push up some altcoins. Except this time there are some with real use cases.

Measured against the increase in use in 2020, Sectors in which there is the greatest interest include oracles, interconnectivity, DEX (decentralized exchange) tokens, unsecured loans, and liquidity provision.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement is associated with risks. You must do your own research when making a decision.

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