Why This Crypto Bull Run Might Not Live Up To The Past: Analyst
May 03 2024 - 9:30AM
NEWSBTC
In a detailed analysis shared with his 788,000 followers on X
(formerly Twitter), renowned analyst Pentoshi has forecasted a more
restrained outlook for the current crypto bull run, suggesting that
it may not mirror the explosive growth seen in previous cycles. His
insights provide a deep dive into the underlying factors that could
temper the market’s performance. Why Crypto Investors Have To
Expect Diminishing Returns Pentoshi began his analysis by stating,
“This cycle should have the largest diminishing returns of any
cycle,” attributing this prediction to several key market
conditions. Primarily, he noted that the base market capitalization
for cryptocurrencies has increased significantly in each successive
cycle, setting a higher starting point that makes further
exponential growth increasingly challenging. “Each cycle has set a
floor about 10x the previous lows in terms of market cap,” Pentoshi
explained. He provided a historical context, recounting that when
he entered the crypto market in 2017, the market cap for altcoins
was only around $12-15 billion, a figure that ballooned to over $1
trillion during peak periods. He argued, “That growth isn’t
repeatable,” pointing out that the decentralized finance (DeFi)
sector, which was then nascent, played a significant role in
driving previous cycles’ exceptional returns. Related Reading: Buy
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Another significant factor Pentoshi highlighted is the dramatic
increase in the number of altcoins and the corresponding market
dilution. “Today, however, there are a lot more alts, and a lot
more dilution,” he remarked, indicating that the proliferation of
new tokens spreads investment thinner across the market, reducing
the potential for individual tokens to achieve substantial price
increases. Pentoshi also touched upon the demographic shifts in
crypto ownership. He contrasted the early days of crypto adoption,
when approximately 2% of Americans were involved in the market, to
the present, where over 25% of Americans have some form of crypto
investment. “It just requires more capital to move the markets, and
there will continue to be a lot more alts, spreading it out
further,” he noted, emphasizing the logistical and financial
challenges of replicating past growth rates in a much more
saturated market. An often-overlooked aspect of market dynamics,
according to Pentoshi, is the role of token liquidity and its
impact on price stability. He detailed that recently, tokens
amounting to about $250 million were unlocked daily, though not
necessarily sold. “Assuming they all got sold, that is the inflows
you’d need just to keep prices stable for 24 hours,” he explained,
highlighting the delicate balance required to maintain current
market levels, let alone drive prices upward. Related Reading:
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$45 Looking forward, Pentoshi was conservative in his expectations
for the Total3 index, which tracks the top 125 altcoins (excludes
Bitcoin and Ethereum). He estimated, “My best guess is that this
cycle we don’t see Total 3 go 2x past the 21′ cycle ATH. So 2.2T
max for Total3.” This projection underscores his broader thesis
that while the market continues to offer daily opportunities, the
era of “easy, outsized gains” might be behind us. Pentoshi
concluded his analysis with advice for investors, suggesting a more
cautious approach to market participation. “If you believe the
cycle is 50% over, you should be taking out more than you are
putting in and building up some cash and buying other assets with
lower risk in the meantime,” he advised, stressing the importance
of securing gains and diversifying holdings to mitigate risk.
Reflecting on the psychological aspects of investing, he added,
“Most people never really learn. Because if you can’t control your
greed, and defeat it, you are destined to give back your gains
repeatedly.” His parting words were a reminder of the cyclical and
often predatory nature of financial markets, urging investors to
secure profits and protect themselves from foreseeable downturns.
At press time, TOTAL3 stood at $635.565 billion, which is still
more than -43 % below the last cycle high. Featured image from
iStock, chart from TradingView.com
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