Are We In A Crypto Bull Market? Evaluating Crypto Performance

A bullish market is characterized by strong upward trends in the underlying asset's price performance. Sometimes it can focus on a single asset or the collective market that consists of various assets. For example, the cryptocurrency market consists of more than 1,000 digital currencies. However, the bulk of the value revolves around major digital coins such as Bitcoin, Ethereum, and XRP.

Determining whether the cryptocurrency market is bullish or bearish at any given point requires evaluating the collective price movements. Fortunately, the market mostly follows Bitcoin's price performance. Bitcoin is the pioneer cryptocurrency that kickstarted this market, and it also happens to have the highest trading volume out of all other digital coins.

Bitcoin leads a strong bullish charge

The cryptocurrency market has predominantly been bullish for the better part of 2020, and the same applies to the other digital coins in the top 10 list. A look at Bitcoin's price performance on a year-to-date basis reveals the extent of the bullish market.

Bitcoin's impressive year-to-date rally has seen the price grow from just below $5,000 towards mid-March. The price has so far ballooned above $19,000, which is an impressive feat that has seen it grow by more than $14,000. Bitcoin traded at $19,403 at the time of this press with a trading volume of more than $32 billion and $360.29 billion in market cap.

ETH is the second most popular cryptocurrency globally, and it has also enjoyed a strong bullish trend this year. The cryptocurrency traded at $610.63 at the time of this press, representing an impressive jump from a low of around $110 in March.

Ethereum's market cap was $68.68 billion, while its trading volume was $1538 billion at the time of this press. The same bullish performance extends to other cryptocurrencies that have high daily trading volumes and market caps. These coins control the market performance, which means that the market has overall been bullish since March.

Understanding the forces behind the bullish run

All of the top ten cryptocurrencies demonstrated an impressive bullish performance from around March, which indicates a strong force behind the price performance. The rally kicked off at around the same time that the coronavirus pandemic went viral worldwide, forcing governments to declare mandatory public restrictions. Entire economies shut down, leading to the loss of business opportunities. Investors started looking at alternative investment opportunities to protect their wealth from erosion.

Many traditional investment avenues such as securities and indices were on the decline due to the coronavirus-induced economic downturn. Even currencies experienced a lot of volatility and instability this year, leading to an unstable investment environment. These factors made the digital currency market more attractive to investors because it is not affected by the same economic factors that affected the traditional finance system.

Cryptocurrencies presented an avenue for investors to safeguard their wealth while also making some money from the unusual circumstances birthed by the global pandemic. These factors encouraged many people to invest in cryptocurrency, and thus the demand fueled the strong bullish run contributing to a steady rise. The last three months have mainly been interesting due to an influx of institutional buyers and individuals with FOMO. They have pushed the demand leading to a surge in crypto prices to levels previously seen in 2017.

What the 2017 bull run can teach us about investing now

The cryptocurrency market's performance in 2020 is not so different from its performance during the 2017 crypto rally. Common characteristics include a slow start at the beginning of each year and a steep climb near the middle, as well as the end of the year. However, we have to consider the key influences which present the differences between the current bull run and the one experienced three years ago.

The bull run this year is caused by demand associated with the shifting dynamics caused by the unstable investment environment in the traditional finance sector. It also means that a return to normalcy might trigger a crypto selloff, which would offset significant gains from the cryptocurrency market. Such a move would likely happen if a vaccine could eliminate the coronavirus was released and made available across the globe, allowing the markets to recover.

The cryptocurrency market has so far demonstrated that it is incredibly volatile, and prices can come crashing down fast and by huge margins, such as what happened in 2018. Selloffs would trigger such a move as people aim to reinvest their money in recovering securities markets as normalcy returns. Right now, cryptocurrency prices are high, and a selloff chain reaction would easily send prices crashing below $10,000, thus the need for crypto investors to be careful.

Is it still a good time to invest in cryptocurrencies?

It depends on how one invests and also on market factors. For example, if past performance data is anything to go by, it means the current bull run might be on the top end. There might thus not be a lot of extra bullish room to stretch upwards. One also has to keep track of COVID19 vaccine developments because they will likely significantly influence economic recovery.

Many other factors may influence the cryptocurrency market's performance, and one can never predict price direction with complete accuracy—for example, more digital currency investments, especially from institutional investors. One of the best ways to successfully trade cryptocurrencies is to keep track of major accounts' trading activities, otherwise known as whales.

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