Market cap analysis May 21, 2021

As the daily chart shows, the “bearish scenario” has come into play. We certainly don’t like this development, but our aim is to use our analysis to help you understand the current state of the market and avoid hasty or wrong moves. That’s why it’s a good idea to keep watching and take in the message the market is sending us.

Let’s move on to the technical analysis of the chart. Specifically, from April onward, we see that the down days (shown as red candles) have higher trading volume, as the vertical bars at the bottom of the chart show. This is a sign that coins were distributed in the market, as sellers were stronger than buyers. A few weeks ago, on April 24 to be exact, we see a break below the lows (as the further technical details on the chart also show. This happened on increased trading volume too, which strengthens the bearish scenario. At this stage, because the drop was steep, we expect a bounce that could take the market cap back up to 2 trillion. 

Looking at the daily chart, someone might think we have entered a bear market. Note that in stock markets, a bear market is said to arrive when there is a correction of more than 30%. That reference is admittedly quite old, of course, and things may be somewhat different in the crypto market. Unfortunately, there is not much historical data to go on, since this market is relatively new and shows bigger swings. 

If you look at the swings over a longer timeframe, such as the weekly or monthly chart, you will find that the trend remains bullish and we are in a normal correction phase. In the medium term, we expect cryptocurrency prices to fall to lower levels and the market cap to approach 900 billion, i.e. close to the area where there is support. In that area we expect a great many opportunities to appear for good coins, provided there is no negative news for the market as a whole. Such a drop scenario (which many analysts have in the back of their minds) will not play out in  1–2 days but could take quite a while, even 1–2 quarters. 

If you are patient and believe that we will see new highs in the long run, following the longer timeframes mentioned above, you could start building some positions, since we have seen prices pull back by around 50%. At these specific levels, we expect an upward move (though not a long-lasting one) that could bring gains of more than 10%.