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How Does the Crypto Market Correction Compare to Previous Cycles? HashKey’s Mark Wong Shares Insight

Last Updated 5 days ago
Valdrin Tahiri
Last Updated 5 days ago

Key Takeaways

  • The Crypto Market has corrected since its yearly high of $2.72 on March 14.
  • The correction is longer than any corrections that happened in the 2020-2021 bull run.
  • Does the crypto market have more steam left in the tank, or has it already come to an end?

HashKey Capital is a leading investment firm specializing in digital assets and blockchain technologies. Notably, it was the first institutional investor in Ethereum and currently manages over $1 billion in client assets.

In an exclusive interview with CCN, Mark Wong, the head of trading at HashKey Capital outlined the main characteristics of the current bull market, its potential drivers, and the effect of Exchange-Traded-Funds (ETF) on the market.

Discussing the Current Market Cycle

Despite the recent drawback and correction, Wong stated that he is fundamentally bullish in the ecosystem, expecting to see new all-time high in the new year or two. Despite this positivity, he reiterated that timing the market is notoriously difficult, hence not giving any timeline as to when this can happen.

However, Wong gave some key levels he believes can help determine if the market is bullish or bearish, and factors that can drive the trend higher.

“A number of players that are following the market, so when the Bitcoin price moves above 6 digits it will be a lot of FOMO. For Ethereum, the level to break is the all-time high. and for Ethereum the level to break is all-time high. It is possible that the ETF is the factor that pushes the price higher, since it has likely created a baseline level for the price.”

Wong also noted that a potential depeg of a major stablecoin like USDC in March 2023 can cause investors to move toward major cryptocurrencies like Bitcoin or Ethereum, considering them safer. Other macroeconomic factors like further interest rate hikes or a liquidity squeeze could also have a positive effect on the price of cryptocurrencies.

As for the rise of memecoins, Wong  noted that while it probably takes some money away from altcoins, it might not be an entirely negative phenomenon for the crypto market. More specifically, he stated:

“People are attracted to memecoins since they do not believe they can multiply their money at the same factor with majors such as Ethereum or Bitcoin. Despite a possible dilution, memecoins might spark interest from outsiders, in turn brining more money into the market. This is already seen with celebrity endorsements and promotions, even though there is a certain negative connotation to that already.”

Finally, Wong stated that he believes DePin can be one of the dominating narratives of the ensuing cycle.

How Does the Current Correction Compare to Previous Ones

The current crypto market cap correction started in March and has continued for 112 days having a maximum decline of 25% and a current decline of 20%. In the 2020-2021 bull run, the price corrected over 20% five times (red icon). However, neither of them lasted for more than three weeks.

Then, the crypto market cap fell by 56% over a 42-day period. This correction happened 427 days after the upward movement started. The ongoing correction began 476 days after the current upward movement started. So, despite continuing for much longer than that in 2021, it shares similarities when looking at when they began relative to the beginning of the upward movement.

The similarities also carry on to technical indicators. In 2021, the decline started after the weekly RSI generated a bearish divergence in overbought territory. Shortly afterward, the weekly MACD made a bearish cross (red circle).

Crypto Market Cap Movement
TOTALCAP Weekly Chart | Credit: TradingView

In the current movement, the RSI did not generate a bearish divergence. But, it created a lower high inside the overbought territory. Identically to 2021, the MACD made a bearish cross. So, it is possible the crypto market cap is currently at a similar level to where it was in 2021.

If this is the case, the crypto market cap will undergo one more upward movement before beginning a long-term correction.

Crypto Market Cap Prediction: Will a New All-Time High Follow?

A closer look at the increase that started in November 2022 reveals that the crypto market cap is likely in wave four of a five-wave upward movement, in which wave three extended. The sub-wave count is in black. Thus, the wave count fits with the outlook from the weekly time frame, which implies another upward movement is likely.

However, the exact structure of wave four is still unclear. There are two main possibilities for it.

Firstly, the correction would be an A-B-C structure contained inside a descending parallel channel. If this is the case, the crypto market cap will decline once more and reach the channel’s support trend line at $1.95 trillion.

Crypto Market Cap Possibilities
TOTALCAP/USDT 2-Day Chart | Credit: Valdrin Tahiri/TradingView

Secondly, wave four could develop in a symmetrical triangle. In that case, TOTALCAP has already reached its low, and will break out once the consolidation phase is over.

In any case, it is likely that another upward movement is likely after the decline is over. Whether the price bounces at the potential triangle’s support trend line or fall below the May 1 low of $2.04 trillion will determine which is the correct count.

Crypto Market Bull Run Likely Not Over Yet

Despite a nearly four-month correction, the crypto market cap movement does not suggest the market cycle top is in yet. Rather, it predicts another upward movement is likely before the bear market starts. This prediction comes from both the wave count and the similarities with the penultimate decline in the previous market cycle.

Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
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