Cryptocurrency Market Cap At Make or Break Level

Reading Time: 3 minutes
  • The cryptocurrency market cap is at a critical level, testing a two and a half year downtrend
  • There have been six attempts on this resistance line in that time, with four occurring in the past few weeks
  • New money is needed to break through, but the chances of that aren’t looking good

The cryptocurrency market cap is testing a two-and-a-half-year downtrend and hodlers will be hoping that this time is seventh time lucky. However, given that breaking through this strong barrier requires an influx of new money willing to take a chance on cryptocurrencies, how sure can we be that this time is going to be any different?

Cryptocurrency Market Cap Getting Used to Rejection

The issue of a long-standing downtrend in the cryptocurrency market cap was highlighted by Twitter user Feras_Y, who pointed out that the downtrend in the total market cap began in May 2018 as the final bounce following the 2017 bull run hit its peak, since when it has been trending firmly lower:

Feras_Y’s weekly chart shows three occasions when the cryptocurrency market has failed to break out since May 2018, but a more detailed chart shows that there have in fact been seven occasions when the entire market has tried and failed to break this resistance line:

Cryptocurrency Market Cap 1

As the name suggests, the total cryptocurrency market cap is the total value of all the projects in the crypto space, or in other words how much the entire ecosystem is worth. The importance of this number is sometimes underestimated, particularly when it comes to trends. The figure is important because it shows how much money is leaving the space and how much new money is coming in – something that is vital for gauging the health of the market.

New Money Needed

The last major bull run in 2017 was particularly epic because of how much new money came in during the last quarter of the year, thanks in the main to the media exposure as Bitcoin hit $10,000 and continued upwards:

Cryptocurrency Market Cap 2

The total cryptocurrency market cap topped out at $767 billion in January 2018 and collapsed down to $90 billion 11 months later, showing just how much money left the space in that time. The amount of money coming back into the cryptocurrency market since that low has taken us back to November 2017 levels, but it is clear that momentum has slowed since March this year after Bitcoin crashed to $3,850:

Cryptocurrency Market Cap 3

Every attempt to break through the resistance since 2018 has been met with a rejection mainly because no new money has wanted to come into the space and take a chance on crypto, so how do things look now?

Fundamentals Don’t Look Great For a Breakout

On the one hand we can argue that the line has to break at some point, and two years is a long time to wait – in crypto years it’s approaching a decade! There also seems to be a difference in how this assault on the cryptocurrency market resistance level is playing out compared to previous ones. The attempts in May 2018, June 2019, and February this year were one hit wonders which collapsed as soon as they were rejected, whereas now the rejections are less violent and have resulted in another attempt shortly afterward. The cryptocurrency market cap is currently clustered around the resistance line, which is illustrative of the door being hammered harder and more consistently.

On the flip side however we have to look at a more fundamental perspective and ask whether, with coronavirus cases rocketing in America, various countries being locked down following second waves of the virus, and traditional markets looking topped out after their March rebound, are investors really waiting to throw their money at the crypto markets?

We know that FOMO took Bitcoin from $10,000 to $20,000 in December 2017, and this time around that FOMO will only kick in when Bitcoin breaks those all time highs of $20,000. Getting there, and breaking through the cryptocurrency market cap resistance line, will rely on those already exposed to crypto in some way, but is there really an appetite to throw more money into the space right now? That, in many ways, is the $20,000 question.