3 Key Ways The 2021 Bitcoin Bull Run May Be Different From The 2017 One

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After a long wait, the Bitcoin price is finally back in the same price range as it was 3 years ago. In 2017, when Bitcoin (BTC) price peaked at $ 19,900, most altcoins were also seeing weekly gains of 200% or more.

Fast forward to the present, and the price of BTC of $ 19,100 is practically the same as it was on December 17, 2017. You’d think that little has changed despite a few altcoins, but that couldn’t be further from that Truth be removed.

Day view of crypto market data. Source: Coin360

Much has changed in the cryptocurrency space and a significant amount of the required infrastructure has been built compared to 2017.

Today, with the introduction of CME and CBOE futures contracts, strictly regulated derivatives are being offered, and the rapid growth of institutional investors provides an infinite source of demand for Bitcoin.

A new variety of DeFi (Decentralized Finance) platforms with a market capitalization of several billion dollars has also emerged. They are supporting a new system of loans, synthetic swaps and interest income systems for a whole new group of investors.

Compared to 2017, there is a wealth of easily accessible data on price and market capitalization rankings. This should help investors better understand how today’s market was different from the market in 2017.

We can better understand what the cryptocurrency market might look like in a few years’ time by analyzing the differences.

What has changed since 2017?

Top 24 cryptocurrencies in December 2017. Source: CoinMarketCap

In terms of ranking of cryptocurrencies by market capitalization, four of the top five stayed the same. Oddly enough, the market cap of Ether (ETH) and XRP are relatively the same at $ 69 billion and $ 28 billion, respectively. This move took place despite the fact that both cryptocurrencies have seen their prices fall 15% since December 2017.

This effect is caused by the issue of new coins. For example, the coin supply of ether increased from 96.4 million to 113.7 million. The corresponding inflation was 17.9% over three years. For comparison: the total number of Bitcoin in circulation increased by 10.8% over the same period.

Apart from Bitcoin, Ether and XRP, the remaining cryptocurrencies in the top 20 suffered heavy losses. IOTA lost 91%, Bitcoin Cash (BCH) 84%, Litecoin (LTC) 73% and Cardano (ADA) 70%.

Top 24 cryptocurrencies in December 2020. Source: CoinMarketCap

It’s worth noting that of the current top 15, the only newcomers are Chainlink (LINK), Polkadot (DOT), and Binance Coin (BNB). It should also be noted that Polkadot did not exist in 2017 or 2018.

On the other hand, Ether competitors like Cardano, EOS, NEO, Ethereum Classic (ETC) and QTUM seem to be losing ground. Last year they were replaced by interoperability tokens such as Chainlink and Polkadot.

The current top 3 coins BTC, ETH and XRP offer a market capitalization of $ 448 billion, an increase of 7% over three years. The remaining 21 executives currently add up to a capitalization of $ 77 billion, down 41%.

One would automatically assume that Bitcoin dominance has increased sharply during this time, but only increased by 2% to the current 63%. This effect is only possible by adding hundreds of new tokens. The three outstanding sectors are exchange tokens, stablecoins and finally the decentralized financial sector (DeFi).

Institutional investors will influence prices in the future

As already mentioned, there were neither CBOE nor CME futures in December 2017, let alone relevant liquidity. The same goes for the praise and effective investment of institutional investors in Bitcoin.

More recently, even BlackRock CEO Larry Fink seems kind of optimistic that Bitcoin will become an asset class itself.

Derivatives offer Bitcoin and Ether an enormous competitive advantage for professional investors’ money. Recent positive comments from the chairman of the US CFTC regulator, Heath Tarbert, brought the launch of the regulated ETH futures a step closer.

Thus, over time, the likelihood of BTC and Ether being flipped will decrease. In addition to their dominance in derivatives markets, the 97% concentration of grayscale mutual funds from BTC and Ether offers some insight into this theory.

Key factors that will affect the next bull run

Trying to predict massive future market shifts is a daunting and usually ineffective strategy. However, some conclusions can be drawn from this comparison.

According to the Lindy effect, the life expectancy of some technologies is proportional to their age. The longer they survive, the longer their existence can be predicted.

If this paradigm is applied to the sector, one could conclude that the longer a cryptocurrency stays in the top 12, the higher the likelihood that a cryptocurrency will remain relevant three years later.

For example, the Bitcoin and Ethereum “killer” narrative was incredibly popular in 2017 and 2018 when competitor blockchains were likely to overtake industry leaders for their faster throughput, cheaper fees, and improved scaling or “real world usage” .

While these narratives may have sounded wise in 2017, time has proven that the network effect lingers. The best technology doesn’t always win.

Another unique phenomenon in the crypto sector that investors should look out for are hard forks and codebase clones. Bitcoin Cash (BCH), Bitcoin Gold (BTG), Ethereum Classic (ETC) and DASH had already launched forked or competitive clones in 2017. They were successful at first, but a review of their price and market capitalization shows that their success was short-lived.

The entire range of coins and the issuance rate of a cryptocurrency can also affect its price development. High-emission cryptocurrencies may struggle to catch up. These include XRP, Chainlink (LINK), Polkadot (DOT), Stellar (XLM), Tron (TRX) and Tezos (XTZ).

While each of them has many compelling real-world uses and impressive partnerships, their massive coin supply makes sharp upward price movements difficult.

The retail-driven flow will almost certainly boost some altcoins, unless this time around there are some with real use cases.

Judging by the increase in usage in 2020, oracles, interconnectivity, DEX (Decentralized Exchange) tokens, undocumented loans and liquidity provisioning are likely to be some of the sectors where increased interest can be expected.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.