Crypto Market Cap Slides 18%: What History Tells Us About What Comes Next

Key Takeaways

• The crypto market has corrected by 18% since its March highs.
• The current correction is similar to that of December 2020.
• Is there more downside expected or is the bottom in place?

The crypto market has experienced two notable corrections this year. The first was in January and amounted to a drop of 19%, while the second happened this week, a fall of 18% from the March highs.

Neither of these corrections are as deep as those in the previous bullish cycle, leading to two contrasting possibilities. Either there will not be as much downside in the current cycle, or the current correction is not yet complete.

How Does This Correction Compare to Previous Ones?

The Total Crypto Market Cap (TOTALCAP) has fallen 18% since its high of $2.72 trillion last week. Today (March 20), the drop culminated with a low of $2.21 trillion before a slight bounce. This was the deepest correction since a 19% drop in January.

In the previous bullish cycle between March 2020 and November 2021, there were five corrections deeper than 20%. Four of them were between 20 and 30%. Two occurred before the all-time high (yellow) and two happened after (red). Then, the final correction amounted to a 56% drop (white).

Since TOTALCAP has not broken out above its previous all-time high yet, this week’s correction shares similarities with the 30% drop of December 2020.

Additionally, the two crypto market corrections this year are very similar to the ones before the all-time high (yellow) in the previous cycle. The weekly RSI also supports this hypothesis, having generated nearly identical values both times (yellow & red icons).

With this in mind, it is possible to say that this correction will not mark the end of the bull market. However, since it is shallower than the ones in the previous cycle, a closer look at the movement in a shorter time frame is required to determine if the bottom is in place.

Is the Crypto Market Correction Over?

The 3-day time frame gives a bearish picture, suggesting that more downside is expected.

Firstly, TOTALCAP increased above the $2.40 horizontal area and has now fallen below it, confirming that the movement is a bearish deviation.

Secondly, the wave count suggests TOTALCAP is in wave four in a five-wave upward movement. Since wave three started in June 2023, a correction longer than two weeks is likely. The sub-wave count is in white.

A decrease to the 0.382 Fibonacci retracement support level at $2.06 would amount to a 24% drop from the high, more in line with crypto market corrections from the previous market cycle.

Finally, the three-day RSI has fallen below 70 (red icon) and is trending downward.

In any case, since there has not been any retracement since the drop started, it is possible that TOTALCAP returns to the $2.40 trillion level and validates it as resistance before continuing its downside.

Crypto Market Correction Might Continue

To conclude, the current crypto market cap correction is shallower than the ones in the bull cycle of 2020 and 2021. The correction has also been very short, based on how much time it took for the price to reach its March highs. As a result, it is possible that more downside is likely after an initial short-term bounce.

About the Author

Valdrin Tahiri

Valdrin discovered cryptocurrencies while getting his MSc in Financial Markets from the Barcelona School of Economics in 2017. He has been an avid investor and trader since. Valdrin has written for several cryptocurrency media companies such as BeInCrypto and CoinGape.

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