Market Report: Comparison of Bull Market 2016 and Bull Market 2020

Overview of the cryptocurrency market from downtrend to uptrend

  • The uptrend period when Bitcoin approached $18.000 and what is happening now reminds us of Cycle Theory in the previous article, as well as the uptrend period of 2016-2017, simply because the market can change anytime, but human psychology remains the same. In this article, we will look at 2 periods 2016-2017 and the current period, so that investors can draw their own conclusions about what to do when the market is in FOMO.
  • Some highlights: Bitcoin increases sharply to important levels, Google Trends and Multilevel, player psychology and market cycle, factors participating in the market cycle, overview of the defi world, etc.

I. Market Context

It’s another crazy day with Bitcoin, at which Bitcoin has broken through a series of resistances from strong to weak ones, and is now approaching $20k - the old peak in 2017-2018.

This period and what is happening remind me of Cycle Theory, as well as the uptrend period of 2016-2017, simply because markets can change anytime, but human psychology remains the same. This article will compare clearly the two periods: 2016-2017 and the current period, so that you can draw your own conclusions about what to do now.

II. Similarity

Bitcoin is in uptrend, approaching important levels.

One thing in common, which is also a harbinger of the entire market in 2016 as well as 2020, is that Bitcoin entered a relatively strong uptrend, and broke all important resistances.

If following the normal definition of critical resistance, the majority would think the current resistance is at $20,000. However, for the writer, right now, Bitcoin is likely to be at its true peak: $18.000.

Looking at the major milestones of the 2017 peak - Weekly Close, Bitcoin has never really closed at $20,000. Most of the trading volume, according to VPVR, happens around the $14.000-17.000 zone. And if everything goes well, the BTC weekly candle closes above it, and people who are in a short position will have a relatively painful time in the next round.

That’s to confirm $20,000 is actually just a psychological barrier for Bitcoin. And what is a psychological barrier, will often be easily broken.

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And this is also the first similar point between the market in 2016 and in 2020. The price goes up in suspicion and fear of those who have lived too long in the downtrend and creates liquidity for buyers.

From this suspicion, we see the inevitable similarity between the two seasons: Google Trends and the children of Ponzi.

Google trends and Multi-level

One interesting thing during the recent Bitcoin’s uptrend period is that despite the price going up, it has not yet attracted too much attention from the outside crowd. Looking at Google Trend, we see that our Google Trending index is at a relatively low level. Unlike the peak of 2017 ($20.000) or 2019 ($14.000), Bitcoin's Google Trending is currently still hovering around $15.000-$20.000. The keyword “how to buy Bitcoin” is also at a relatively low level. This keyword increased to its peak in mid-2017, when the price of Bitcoin climbed, and peaked when the price of Bitcoin peaked. Based on Google Trends, we can see that this is just the beginning, when the outside crowd has not come in because of FOMO, as well as the price going up in the suspicion of the majority.

In fact, even though the price is very high, the whole market is still very careful. We haven't seen too many news articles about Bitcoin (except for financial channels like VTV Money), nor have any stories about "Vegetable Lady" talking about Bitcoin. And while the crowd is still not FOMO, the price is still likely to go up as Bitcoin's chart and momentum are still relatively ideal.

And when the charts and momentum are beautiful, there are people who will not stand still like most traders today. They are people who are very good at seeing opportunities: multi-level teams.

Children of Ponzi

Multi-level once again has been, and will continue to grow in the future. In 2019 - 2020, we have witnessed an extremely impressive momentum of multi-level teams like BTCV. Currently, it must be recognized that even if the price is down, BTCV is not dead like Bitconnect, but still stands firm around the $70 mark (and it must be recognized that whoever entered from the beginning is still profitable).

However, it led to an exciting psychology among teams in Vietnam: Using Crypto as a product to run multi-level marketing (MLM). And this will be extremely popular, at least in Vietnam in the next 2 years.

Why Crypto? There are two main reasons for this.

The first reason is that the chart of Bitcoin is going up strongly, which easily stimulates the greed of those who want to make money in a fast way. And based on Bitcoin, multi-level teams will steer in a different direction to easily dazzle newcomers. The sentence like “When Bitcoin was at $1000, everyone was skeptical, at $10,000 everyone doubts, at $20,000 everyone still doubts. If you missed the opportunity with Bitcoin, buy coin abcxyz” is too familiar with experienced players, but it is very new to those who have never played Crypto or finance. And usually, they are the ones with the most money.

The second reason is that raising capital and trading Crypto in Vietnam has not been guaranteed by the government. Vietnam's legal framework in Crypto is also relatively sketchy. Therefore, this is a "gold mine" for multi-level groups out there. If, unfortunately, they collapse, the deceived person can only bite the bullet without being able to sue anyone? This is perhaps more understandable with people who followed iFan 2017.

In general, the fact that there is a new wave of MLM entering the market is also a factor that contributes to the growth of the market. Until now, MLM has been one of the strongest factors attracting new capital into the market. MLM players often tend to invite friends and relatives to play with, which ultimately pushes more money into the market.

Player psychology and market cycle

No matter how it changes, the player psychology remains the same. Everything still goes in cycles, like the way humans have lived from the past till now.

In my opinion, the current stage is Disbelief, at which most of the market participants are those with little experience (and pain) with Crypto. Therefore, when the price goes up, people look at it and doubt it. Although the players are different between 2016 and 2020, the overall psychology remains unchanged.

Meanwhile, outsiders look at Crypto with two attitudes. The first one is generally still skeptical. The second one includes curiosity and excitement. Because they have not experienced pain, when they look at growth, they will see opportunities. And after Disbelief will be Hope - the period of Hope and recovery.

And those are the similarities between the market in 2016 and 2020.

To me, all of them are very good signs for a new bull season. However, this Crypto bull season is also MUCH different from 2016-2017. And if you do not understand the rules of the game, you will most likely be left behind.

III. Difference

Market context

The biggest difference between the two bull seasons is probably the market and world context. 4 years ago, without COVID, the world did not face a sharp economic recession. And of course, there is no bailout of several trillion dollars by the US government with interest rates approaching flat levels.

However, America is not everything. To analyze Crypto, we have to look at China. After the COVID 2020 season, China stepped out proudly with the significant growth in economy compared to European countries and the US. And while Crypto is still a matter of legal controversy in the US (as of now, whether ETH and XRP are securities is still being debated), China has voiced its support for Blockchain, and is at the forefront in the digital currency race.

And when the eldest brother takes the lead, the juniors also follow. Gradually, countries in the vicinity of China will also apply Blockchain as well as implement the necessary laws for the Crypto Market to develop. This is also good news for the market

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The market context mentioned will also greatly affect the market participants, and this will also be another factor that determines the game.

Market participants

4 years ago, Crypto was not known too much except online money makers that are expertise in airdrop hunting, or IT guys who were curious to try to mine some BTC or ETH. Crypto conferences, which were filled with nerds, are now filled with curious "investors" wearing vests looking for opportunities to make money.

Currently, many institutional investors, large investment funds, Wallstreet and Banking are participating in the Crypto market. Therefore, the rules of the game have changed quite a lot. Instead of just knowing a few tricks about technological concepts or skills to be able to shine, most players now know Technical Analysis. Projects, including scam projects, must therefore work more carefully. The current cash flow in the market is relatively smart and knowledgeable, so the market will be much more fierce. 2016 - 2017, the concept of leverage as well as Shorting, even though it exists, is still relatively unknown. In 2020, with more and more traders knowing Technical Analysis, derivatives and leverage are mushrooming. Buy and hold doesn't seem like an interesting option anymore, at least with smart money (because they can short hedge when holding coins).

This smart capital also makes the volume flowing into the market relatively larger. It is no coincidence that the USDT capitalization is that large. Even compared to 2016 when Market capitalization peaked at $800 billion, Tether's capitalization was $2.2 billion. Currently, the market is reaching a capitalization of $ 500 billion, Tether USD capitalization has accounted for nearly $18 billion, which is 8 times higher than before, not to mention a series of other stablecoins such as BUSD, USDC, etc.

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This drives a change in projects and the way money flows in the market. As before, money pouring into the market must go to Bitcoin and then flow into Altcoins. Mostly only the top 10 coins have Altcoins/USDT pairs (even in early 2018, Binance still didn't have top coin/USDT pairs). Therefore, when BTC rises, Altcoins will suffer a very strong heat shock, and when BTC goes down, Altcoins will suffer an even more terrible heat shock. This hinders the development of the altcoins market and prevents traders from being able to trade freely.

In 2020, most altcoins have Altcoins/USDT pairs. Therefore, the influence of BTC on them has been more or less reduced. Players trading altcoins are also much more comfortable than before, creating a premise for the development of projects. And for that reason, the projects in 2020 are much better than before.

Projects

If most of the new projects in the 2016 - 2017 season followed the “pie in the sky” trend and applied Blockchain in all aspects of life (although most of them were not necessary), in the 2020 - 2021 season, the projects will be done much more sophisticatedly.

At this time, it can be said that “pie in the sky” projects are still relatively numerous, but many projects are really looking for ways to "find a solution for a problem" rather than simply "find a problem to solve" like before. And in 2016-2017, many projects focused on the payment field (which is extremely difficult), but now the projects are focusing on solving two problems: DeFi development and Infrastructure improvement of Blockchain.

Looking at DeFi's increasing Total Locked Value and the value DeFi is bringing, indeed DeFi has been and will be one of the extremely growing factors in the coming years. Finally, blockchain is really working, and this is what most blockchain projects in 2016 lacked.

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The appearance of DeFi brings new capital from ordinary people who do not know anything about Crypto into the market, and because of that, they will need payment gateways converting Fiat to Crypto and vice versa. Last, it will create more opportunities for market development.

Fiat - Crypto and Crypto - Fiat

The 2016-2020 period is a very long journey. And actually, I have to take my hat off to the parties that are still working every day to improve the experience of being familiar with Crypto. The biggest one, probably Binance.

It can be said that buying Crypto has never been so easy. If before, you wanted to buy TRX, XRP or any Altcoins, you would have to find black markets, or separate parties like Santienao, Remitano, or in the US, Coinbase, to deposit fiat money, in exchange for Bitcoin , then transferred Bitcoin to an exchange like Bittrex or Binance to buy Altcoins. It took a lot of time, effort, and even money.

However, with the development of Binance, you can even use your credit card to buy USDT or BTC. Or, you can trade USDT for cash directly via Binance P2P. Just transfer money from your Bank to the merchant's account, USDT will be transferred to your wallet. And you can also withdraw profits in a very simple way, not as complicated as before. And not only with USD/USDT, Binance even allows trading Crypto with currency pairs like Euro or British Pound. However, I haven’t experienced this feature deeply, so I don’t have much to talk about. But it seems that across the local markets, local exchanges are also rolling out this feature.

And as users everywhere are more approachable to Crypto, it will also be easier for them to put money into the market. This is an essential factor to push the market up in the coming time

IV. Conclusion

In general, even though the Market Cycle and player psychology remain unchanged, the Crypto market has changed a lot in 2016 - 2020. For me, most of the changes are positive ones, and development always brings great opportunities.

However, to seize this opportunity, players also need relatively more knowledge than 2016. And to start, you can read the articles of BMV Academy for newbies.