The big bubbles in the crypto markets

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To date, three major speculative bubbles have formed in the crypto markets.

In reality, many more have formed, but they have often been short-lived, limited to just a few cryptocurrencies, or not particularly large.

In contrast, those that have been huge, widespread, and above all long have been only three. And in any case, they happened, unsurprisingly, the year after the year in which a Bitcoin halving occurred.

The term halving means halving the rewards for miners, which is the only source of new BTC issuance. Halving the reward therefore also halves the production of new BTC, thus reducing the supply of BTC in the market.

There have only been three Bitcoin halvings, namely November 2012, July 2016, and May 2020.

The first of three crypto bubbles

The first major speculative bubble in crypto markets occurred in 2013, the year after Bitcoin’s first halving.

In fact, there was one on the price of bitcoin in 2011 as well, but it was only for bitcoin and lasted less than a year.

In contrast, the 2013 one affected the entire crypto market, even though it was still almost completely dominated by Bitcoin at the time, and lasted over 12 months. Indeed, it actually followed the rebound after the 2011 bubble burst, so the 2011/2013 bull run actually lasted two years.

At the time of the Bitcoin halving in November 2012, the crypto market was capitalized at less than $150 million, of which more than 90% was Bitcoin. The great speculative bubble of 2013 caused this capitalization to skyrocket to $16 billion at its peak, between November and December.

In other words, in about thirteen months, the increase was almost 12,000%. If, on the other hand, we take as a reference the minimum value following the bubble of 2011, the increase in two years was 75,000%.

It was therefore practically a giant bubble, very extensive, and of considerable duration.

The 2011 one was just as big but of a slightly shorter duration, and mostly focused on Bitcoin. In contrast, the 2013 one was for the entire crypto market, although still 89% dominated by Bitcoin.

For example, in 2013 Ethereum did not yet exist, while Ripple and Litecoin already existed.

The second crypto bubble

Over the next two years, 2014 and 2015, there was a terrible bear market that produced an 81% collapse in the overall cryptocurrency market capitalization to $3.1 billion in January 2015.

By then Bitcoin’s dominance had fallen to 80%, and until the following year’s halving there was no way to get back to 2013 levels.

By the end of May 2016, however, before the halving, the crypto market cap had already risen to $10 billion, and it started to soar again from October.

During this speculative bubble, an important role was played by Ethereum, which largely contributed to both the sharp increase in the overall capitalization of the crypto markets and the reduction in the dominance of Bitcoin.

The peak of this cycle was in early January 2018, although Bitcoin’s price touched it in mid-December 2017, with a total market capitalization of over $800 billion.

Compared to $3.1 billion in January 2015, the growth had been 26,000%, while post-halving growth was 6,000%.

The third bubble

2018 and 2019 were also difficult years, followed in March 2020 by the collapse of global financial markets due to the outbreak of the pandemic.

The low point of this cycle was reached in December 2018 with market capitalization falling to 100 billion, a loss of 88%.

Bitcoin dominance, which had fallen to 32% in January 2018, has risen to 55%.

In May 2020 there was the third halving, and in October of the same year the last major bull run was triggered.

It peaked in November 2021, when the crypto market hit $3 trillion, an increase of 2,900% from the 2018 low and 667% from October 2020.

As one can easily guess, this third bubble was much smaller than the previous two, perhaps in part due to the exponential increase in the number of cryptocurrencies.

Suffice it to mention that Bitcoin dominance fell from 60% in October 2020 to 42% in November 2021.

In other words, since the bubble of 2017-2018, there has been a large dispersion of investments in cryptocurrencies, which were previously mainly concentrated in Bitcoin. This generated more distributed overall performance, with a reduction in Bitcoin’s primary role and Ethereum’s secondary role.

For example, Ethereum’s dominance was 7% in July 2016, while it also rose above 20% in January 2018. After returning to 7% in 2020, it was never able to cross again the 20% wall except for a very short period. .

This is a pretty clear indication that crypto markets over the years have grown tremendously, which may be part of the reason why bubbles have become more and more contained.

Since its peak in November 2021, the total capitalization of the crypto markets has fallen to $780 billion in November 2022, a 74% loss significantly lower than those of the two previous bubbles.

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