It makes no sense to compare the current recession to 2018

Why is it pointless to compare the current crypto market crash with 2018?

With bitcoin price down 50% from its all-time high (ATH) in November, investor sentiment has become increasingly depressed, leading to debates about new ATH levels turning to recovery potential.

Bitcoin price chart | Source: Trade View

The current plunge in the crypto market is highly correlated with the plunge in stock markets, with tech stocks recently falling to new 14-week lows.

But while most agree that investor uncertainty is being driven by the prospect of higher interest rates and political tensions amid the deepening Ukraine-Russia crisis, a look at the macroeconomic fabric does quell fears of another bear market in the year 2018 can justify?

What is the truth?

Fear of a repeat of 2018 has returned to the bull and bear market debate.

“The macro-triggered recession in March 2020 has more structural similarities than 2018 (it was a crypto recession in a very risky environment),” said Zhu Su, co-founder of crypto hedge fund Three Arrows Capital (3AC) comment on twitter.

To back up his argument, Su was “reminded” of three rate hikes in 2017 – a memorable year that featured the biggest crypto rally ever.

2018 was a terrible year for investors in the crypto market as Bitcoin price fell by around 65% between January 6th and February 6th.

In September, the MVIS CryptoCompare Digital Assets 10 Index lost 80% of its value, making the crypto market crash worse in percentage terms than the 78% bursting of the dot-com bubble in 2002.

What happens next?

After the market crash in 2018, it took almost three years for the bitcoin price to recover to the ATH, which it reached in late 2017.

Since then, however, the cryptocurrency market has reached a whole new level of size and complexity.

Looking at sectors like DeFi and NFT shows that the current market is irrelevant for 2018.

CNBC Investing Club host Jim Cramer anticipates “a surge of cryptocurrency into stocks” as he highlights his list of recommendations. However, Su reminded Cramer:

“The most I see going is in growth tech stocks and FAANG (Facebook, Apple, Amazon, Netflix and Google). It is highly doubtful that anyone would buy valuable stocks or utilities when stablecoins in DeFi offer much higher yields. Millennials can’t afford Brazilian resource extraction facilities, Chinese poker or life insurance.”

Meanwhile, the multitude of institutions that have entered the market over the years will also play a role in market reaction.

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