Bankless: Five reasons to remain bullish on cryptocurrencies

Author: David C, Bankless; Compiler: Baishui, Golden Finance

In case you haven’t noticed, market sentiment has been… pretty bad lately.

Bitcoin has fallen sharply over the past month, and some altcoins have fallen even more severely, leading many on crypto Twitter to share pessimistic messages. However, despite the current downturn, historical trends and potential moves suggest that we are far from the end of this cycle.

Today, we’re digging for hope. Here are five reasons not to lose faith in this cycle and look beyond the current turmoil in the market.

First, Retracement = Normal

For veterans of the cryptocurrency market, volatility is par for the course.

As Bitcoin’s fourth 20% pullback in the past 12 months, there’s nothing historically out of the ordinary about the current pullback. Experiencing multiple declines — from minor 5-10% drops to severe 40-70% plunges — and not being shaken is a typical experience during a bull run.

Corrections are not only common, they’re also common. This is to be expected.

2. Historical Timing

At present, the importance of Bitcoin halving lies not in its impact on supply, but in its impact on the next 12-18 months.

Analysis shows that the market bottom usually occurs about 1.3 years before the halving, and the peak occurs about 1.3 years after the halving, or about 480 days.

These declines can be seen as regular experiences on the road to new all-time highs, consistent with the broader cyclical rhythm of Bitcoin's continued rise.

Three, institutional long-term investment

Now, consider what kind of conviction investors need to lock up large amounts of money in tokens.

Recently, a16z acquired approximately $90 million worth of Optimism’s OP tokens with a two-year lockup period, demonstrating a strong belief in the potential of Superchain. Similarly, institutional funds purchased $100 million of locked SOL during the FTX asset sale, and set a four-year lockup period on those tokens under the terms. The second round of sales follows the first round of $1.7 billion worth of SOL sold in early March, which was only a 15% discount ($95-110) compared to the current market price (approximately $130), highlighting the importance of the four-year lockup period.

These long-term holders demonstrate a strong belief that the market will continue to develop in the coming years.

Four, Fear and Greed Signals

As a young market that focuses first on narrative, emotion plays a key role in cryptocurrency.

By examining the Fear and Greed Index, you can gain insight into where the market is headed. On the index, 0 equals maximum fear, while 100 equals maximum greed.

< ... The decline we are experiencing today began when the index hit 90 last month. It is now in neutral territory around 50, which historically indicates that a bottom is imminent. On January 24, the index was at 48. Over the next month and a half, Bitcoin went from $39,000 to $73,000. A similar scenario played out last October. The index hit 44, and by the first week of December, BTC had climbed from around $26,000 to $40,000.

What did Warren Buffett say? I am fearful when others are greedy, and I am greedy when others are fearful.

Five, Government Hostility

Ultimately, the war waged by the US government against cryptocurrencies shows one thing - cryptocurrencies remain a tool for ensuring digital rights and freedoms.

Essentially, Bitcoin and cryptocurrencies were created to develop a system for achieving true financial independence. About 25% of the world's people do not have bank accounts, and the rest operate in outdated financial tracks, and the solution provided by blockchain can not only speed up and connect the entire world's financial system, but also allow people to truly own their wealth and access it from anywhere in the world. Recent regulation highlights the ongoing struggle between the old and new worlds and demonstrates the ability of cryptocurrencies to preserve financial independence, property ownership, and other fundamental rights.

As we move deeper into a fully digital age, the case for cryptocurrencies to enable digital autonomy will only grow stronger, not just in the financial sector, but also for self-custody of data and online identities.

Future Outlook

Despite the current negative sentiment, there are compelling reasons to be optimistic about the market.

Bitcoin’s resilience through continued declines, the historical cadence of halvings, institutional longs, signs of market sentiment, and the role crypto plays in protecting digital rights all make a clear case for remaining bullish.

As these cycles play out, it would be wise to expect more corrections ahead, but view them as opportunities, not problems.