The Crypto Market Is Maturing

The new crypto rally, predictably, caused a new surge of interest in cryptocurrencies, launching a new hype cycle. However, this time the market and players behave differently from the last crypto rally in 2017. Let’s take a look at what people expect of crypto in 2021.

The Hype Train Has Slowed Down

During the last crypto rally we saw a lot of “blockchain tourism” by corporations and other institutional players - they played around with blockchain for a few weeks and then dropped it. This fueled the hype train even more, as every attempt “to go crypto” was widely publicized, but didn’t really add anything to the industry. 

However, in 2020, the trend shifted. Nowadays, according to the Deloitte Blockchain Survey, companies aren’t interested in experiments with blockchain anymore and don’t see it as “free money”. They look for pragmatic solutions to business problems and make blockchain technology work for their specific needs.

Besides, large investors also started to think of cryptocurrencies in a more practical way as the industry matured. 

“The type of investors in this bull run are very different. They’re super sophisticated institutional investors like legendary Paul Tudor Jones, [Stanley] Druckenmiller,” said Tyler Winklevoss, early bitcoin investor, co-Founder of Winklevoss Capital. “This is the most sophisticated investors, the smartest people in the room, buying the bitcoin quietly. It’s not a FOMO thing, so it’s very different from 2017. This cast of characters, these companies, these investors were not in bitcoin back then.”

His opinion is supported by other experts in crypto and finance. "I am positive this is not November 2017. Listen, the market got way, way overbought. It was overbought by every statistic, every metric you can look,” said Galaxy Digital's CEO Mike Novogratz. According to him, today the main driver for growth is adoption. "Insurance companies, asset managers, big institutions haven't bought bitcoin yet and they want to,” he added.

Does it mean that the hype around blockchain, Bitcoin, and crypto is over and it is all about practicality and rationality now? No, not at all. Any asset that shows rapid growth inevitably generates a lot of interest from small investors and traders and causes FOMO and we can see that already in the crypto market. But despite the fact that Bitcoin in January 2021 has reached $40,000 compared to $20,000 in December 2017, the hype is noticeably lower. 

To be fair, the fact that the industry matured and lost “novelty factor” is not the only reason - mainstream media all over the world have other topics to highlight, so the new crypto rally is a bit lost to the general public,

Exchanges Are Overloaded

Well, another proof that the hype is still there, albeit lower, is the influx of traffic and new users crypto exchanges are facing.

In December 2020 traffic to major crypto exchanges was 23% greater than in November and almost twice as high as the beginning of the year.  Interestingly, there is no major shift in shares of major exchanges in this traffic. Some relatively new players are gaining momentum, but traffic to the “whales” grows almost equally.

And it has already started to cause issues: some crypto exchanges suffer from outages due to overload. It reminds us of the later stage of the 2017 crypto rally when major trading platforms also couldn’t keep up with the demand.

People Seek Info

Another sign of crypto audience calming down is a shift is search queries: instead of just searching basic information on cryptocurrencies people started to look for statistics, charts, and actual data. Queries like “Bitcoin price chart” and “Bitcoin price analysis” are becoming more and more common. Huge financial brokers note a significant increase in such requests. The audience not only looks for ways to earn on Bitcoin and other cryptocurrencies but also wants to know for sure whether these ways actually work.

Technical analysis and cryptocurrency price action started to slowly replace “gurus” that relied only on their status as proof of their predictions. The audience finally realized that Bitcoin (or any other cryptocurrency) is just another asset, just like stocks or fiat currencies. And it can be traded just as easily, just in one click. 

“In contrast to 2017, today we see very few impulsive, almost instant purchases made by new users,” said Michael Geiger, the CEO of Libertex. “Most of our customers analyze crypto assets thoroughly before buying.”

In other words, cryptocurrencies lost their “magic” status, so people became less affected by hype and started to rely on logic and analytics. It may be disappointing for some, but it shows that the industry has finally matured.