Five reasons to remain bullish on cryptocurrencies

In case you haven’t noticed, market sentiment lately has been… pretty bad.

Bitcoin has fallen sharply over the past month, and some altcoins have fallen even more sharply, leading many on crypto Twitter to share pessimistic messages. However, despite the current downturn, historical trends and potential moves suggest that we are far from the end of this cycle.

Today, we’re tapping into hope. Here are five reasons not to lose faith in this cycle and to look beyond the market’s current turmoil.

1. Retracement = Normal

For veterans of the cryptocurrency market, volatility is par for the course.

As Bitcoin’s fourth 20% pullback in the past 12 months, the current pullback is nothing historically out of the ordinary. Riding multiple declines — from mild 5-10% drops to severe 40-70% plunges — and not getting shaken is typical during bull markets.

Corrections are not only common, they are expected.

II. Historical Opportunity

At this point, the importance of the Bitcoin halving is not in its effect on supply, but in its impact on the next 12-18 months.

Analysis shows that the market bottom usually occurs about 1.3 years before the halving, and the peak occurs about 1.3 years after the halving, which is about 480 days.

These declines can be viewed as routine experiences on the road to new all-time highs, consistent with the broader cyclical rhythm of Bitcoin's continued rise.

3. Institutional long-term investment

Now, consider what kind of conviction it would take for an investor to lock up such a large amount of capital in a token.

Recently, a16z acquired about $90 million worth of OP tokens from Optimism with a two-year unlocking period, showing a firm belief in the potential of the super chain. Similarly, institutional funds purchased $100 million of locked SOL during the FTX asset sale and set a four-year lockup period for these tokens according to the terms. The second round of sales follows the first round of $1.7 billion worth of SOL sold in early March, which is only a 15% discount ($95-110) compared to the current market price (about $130), which highlights the importance of the four-year lockup period.

These long-term holders demonstrate a strong belief that the market will continue to advance in the coming years.

4. Signals of fear and greed

As a young market that focuses first and foremost on narrative, emotion plays a key role in cryptocurrency.

Examining the Fear and Greed Index provides insight into where the market is headed. On the index, 0 equals maximum fear, while 100 equals maximum greed. The decline we are experiencing today began when the index hit 90 last month. It is now in neutral territory at around 50, which historically has indicated that a bottom is imminent. On January 24, the index was at 48. Over the next month and a half, Bitcoin rose from $39,000 to $73,000. A similar situation occurred last October. The index hit 44, and by the first week of December, BTC climbed from around $26,000 to $40,000.

What did Warren Buffett say? Be fearful when others are greedy and be greedy when others are fearful.

5. Government Hostility

Ultimately, the U.S. government’s war on cryptocurrencies shows one thing — cryptocurrencies remain a tool for securing digital rights and freedoms.

Essentially, Bitcoin and cryptocurrencies were created to develop a system for achieving true financial independence. With approximately 25% of the world’s population unbanked and the rest operating in outdated financial rails, blockchain offers a solution that can not only speed up and connect the entire world’s financial system, but also allow people to truly own their wealth and access it from anywhere in the world. Recent regulation highlights the ongoing struggle between the old and new worlds and demonstrates the ability of cryptocurrencies to preserve financial independence, property ownership, and other fundamental rights.

As we move deeper into a fully digital age, the case for cryptocurrencies to enable digital autonomy will only grow stronger, not just in finance but also for self-custody of data and online identity.

Future Outlook

Despite the current negative sentiment, there are compelling reasons to be optimistic about the market.

Bitcoin’s resilience through continued declines, the historical cadence of halvings, institutional longs, signs of market sentiment, and the role cryptocurrencies play in protecting digital rights all make clear the case for remaining bullish.

As these cycles come to an end, it would be wise to expect more corrections ahead, but to view them as opportunities, not problems.