Why This Crypto Bull Run Might Not Live Up To The Past: Analyst

In a detailed analysis shared with his 788,000 followers on He suggested that it may not reflect the explosive growth seen during the cycle.his insight A deep dive into the underlying factors that can dampen market performance.

Why crypto investors should expect diminishing returns

Pentoshi began his analysis by saying, “This cycle should have the largest decline in returns of any cycle,” and attributed this prediction to several key market conditions. He mainly pointed out that the fundamental market capitalization of cryptocurrencies has increased significantly in each successive cycle, setting a higher starting point, making further exponential growth increasingly difficult. .

“Each cycle sets a floor in terms of market capitalization that is about 10 times the previous low,” Pentoshi explained. Explaining the historical background, he recalled that when he entered the cryptocurrency market in 2017, the market capitalization of altcoins was only around $12 billion to $15 billion, and at its peak, that number had ballooned to more than $1 trillion. did. “That growth cannot be replicated,” he argued, noting that the then-nascent decentralized finance (DeFi) sector played a key role in driving past cycles’ extraordinary returns.

Another important factor highlighted by Pentoshi is the dramatic increase in the number of altcoins and the resulting dilution of the market. “But today, there are far more alternative tokens, and there is much more dilution,” he said, adding that the proliferation of new tokens has diluted the spread of investment across the market, making individual tokens significantly more expensive. It suggested that the chances of achieving an increase are decreasing.

Pentoshi also touched on the changing demographics of crypto holders. He contrasted the early days of cryptocurrency adoption, when about 2% of Americans participated in the market, with today, when more than 25% of Americans have some form of cryptocurrency investment. “You just need more capital to move the market, and alternatives will continue to be more abundant and more diffuse,” he said, adding that past growth rates in a much more saturated market He emphasized that replicating this is a logistical and financial challenge.

According to Pentoshi, an often overlooked aspect of market dynamics is the role of token liquidity and its impact on price stability. He detailed that approximately $250 million worth of tokens were recently unlocked each day, but not necessarily sold. “Assuming everything is sold, this is the amount of inflow needed to keep the price stable for 24 hours,” he explained, adding that the subtle inflows needed to maintain current market levels, let alone increase prices, Emphasizing balance.

Looking ahead, Pentoshi had conservative expectations for the Total3 index, which tracks the top 125 altcoins (excluding Bitcoin and Ethereum). He estimated that: “My best guess is that we don’t see Total3 more than double the 21-minute cycle ATH in this cycle. That means we’ll be up to 2.2T in Total3.” This prediction suggests that the market will While he continues to offer opportunities every day, he emphasizes his broader theory that the days of “low-hanging fruit” may be over.

Pentoshi concluded his analysis with advice for investors, suggesting a more cautious approach to market participation. “If you think the cycle is 50% over, you should withdraw more than you have put in, build up cash, and buy other assets with lower risk,” he advises, locking in and diversifying your profits. He emphasized the importance of this. Retained to reduce risk.

Reflecting on the psychological aspects of investing, he added: “Most people never really learn, because if you can’t control your greed and overcome it, you’ll end up giving back what you’ve gained over and over again.” His Farewell Words reminded investors of the cyclical and often predatory nature of financial markets and urged investors to secure profits and protect themselves from a foreseeable economic downturn.

At the time of writing, TOTAL3 stands at $635.565 billion, still more than -43% below the previous cycle high.

TOTAL3 Market Capitalization, 1 Week Chart | Source: TOTAL3 on TradingView.com

Featured image from iStock, chart from TradingView.com

Disclaimer: This article is provided for educational purposes only. This does not represent NewsBTC’s opinion on whether to buy, sell, or hold an investment, and investing naturally involves risk. We recommend that you do your own research before making any investment decisions. Your use of the information provided on this website is entirely at your own risk.

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