Enjoy the pump so long it's there …..
There has been a pump in the market since the beginning of this year. Nobody knows why and how. Although all the macroeconomic data are very bearish, this makes it more suspicious. But the question is this for real or just a bull trap?
How to figure out a valid crypto bull run?
There are a few key indicators that are commonly used to determine if a crypto bull run is valid. These include:
- Increasing trading volume: A significant increase in trading volume is often seen as a sign of a strong market.
- Rising market capitalization: The total value of all cryptocurrencies in circulation is known as market capitalization. A steady increase in market capitalization is another indication of a strong market.
- Positive news and sentiment: Positive news and sentiment from industry leaders, mainstream media, and social media can indicate a growing interest and acceptance of cryptocurrencies.
- Network fundamentals: Metrics such as the number of active addresses, transaction volume, and mining activity can indicate the health and growth of a specific cryptocurrency network.
Do those points meet the market?
I will discuss the scenario for Bitcoin here. Now look at those points with some data:
- I have drawn you the daily chart for BTC/USD here. There has been a really substantial amount of increase in the trading volume. Increasing trading volume: YES.
Source: https://coinmarketcap.com/currencies/bitcoin/
2. I have drawn here the daily one-year chart for BTC. If we look at the chart, surely there has been an increase in the market cap. But compared with the trading volume, the market cap is still low. That means a lot of trading is going on. Rising market capitalization: NO.
Sorce: https://coinmarketcap.com/currencies/bitcoin/
3. There has been no such positive news for Bitcoin and crypto in the media. On the contrary, there has been all the FUD in the last few days. If we have a look at the Fear and Greed Index, there is a good chance of a dump coming soon. Positive news and sentiment: NO.
Source: https://alternative.me/crypto/fear-and-greed-index/
4. If we have a look at the network fundamentals, this makes me very much biased for a dump. Network fundamentals: NO.
No. of BTC active addresses
Now I let you this point on you. Do you think that no active BTC addresses have risen in the last time? Here is the three-year chart for BTC active addresses.
Source: https://bitinfocharts.com/comparison/bitcoin-activeaddresses.html#3y
Hash rate BTC
In this chart, I have shown the Bitcoin total hash rate vs price for the last three years. In the past, there have priced a substantial hash rate increase with the price increase and vice versa. But there is no clear evidence now for that.
Source: https://www.blockchain.com/explorer/charts/hash-rate
What happened in the last bull run?
In early 2017, the total market capitalization of all cryptocurrencies was around $17 billion. By December 2017, it had risen to over $600 billion.
During this time, the trading volume also increased significantly, with a daily trading volume reaching an all-time high of over $50 billion in December.
Positive news and sentiment also played a role in driving the market upward. Mainstream media outlets such as CNBC and Forbes began covering cryptocurrencies more frequently and positively, and social media platforms like Twitter and Reddit were filled with discussions about the latest crypto trends and investments.
Additionally, the number of active addresses and transaction volume on the Bitcoin and Ethereum networks also increased substantially during this period, indicating strong network fundamentals.
It’s worth noting that this bull run was followed by a bear market in 2018, where the crypto market went through a massive correction and many investors lost significant amounts of money.
Final thoughts
To determine whether the current market pump is a bull trap or not, it’s important to keep an eye on multiple indicators such as trading volume, market capitalization, network fundamentals, and sentiment. It’s also important to be aware of any news and events that may be influencing the market.
It’s also important to remember that crypto is a high-risk investment and it’s important to invest only what you can afford to lose and always do your own research before making any investment decisions.
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