Cryptocurrency market rises 12% as analysts predict recovery

The cryptocurrency market capitalization has surpassed $2 trillion again after a massive crash that wiped out $500 billion in less than a week.

By August 5, that figure had fallen to $1.83 trillion, as Bitcoin fell below $50,000 and Ethereum dropped 23% in a day to below $2,200.

However, that total has since increased by 12%, back up to $2.6 trillion as of this writing.

Is it time for recovery?

Still, while the cryptocurrency market has fallen to a six-month low, analysts are already talking about a recovery. In an Aug. 6 post on X, MN Consultancy founder Michaël van de Pop wrote that “today’s correction could ultimately lead to the bear market of this cycle.”

He added that the massive sell-off wiped $1.2 billion in leveraged positions out of the market.

Meanwhile, Dan Gambardello, founder of Crypto Capital Ventures, said:

“While many think this is the end of crypto, I'm sitting here patiently waiting for the bull market to start as planned.”

“This crash feels like a mix of March 20, 2020 and May 20, 2021,” said Dovey Wan, founder of Primitive Crypto.

March 2020 was a pandemic-induced back swan event, and May 2021 saw a mid-bull market correction due to a leveraged flash.

This dump has a mix of March 20, 2020 and May 20, 2021.

– As a trend in March 2020, macro was caught off guard. If you ask Marco Fund or anyone involved in the JPY carry trade in Hong Kong, most of them didn’t expect it at all. Last week, some Chinese hedge funds focused on risk-off and significant reduction in leverage…

— Dovey “Rug the fiat” Wan (Hiring) (@DoveyWan) August 5, 2024

Trader Alex Kruger echoed that sentiment in an Aug. 6 post on X, saying it was closer to March 2020.

“Altcoins are almost all dead now, so we will start afresh with a new easing cycle without expecting a ferocious performance like 2020-2021.”

The latest cryptocurrency crash wasn't caused by anything crypto-related, but by macroeconomic factors, particularly the actions of Japan's central bank, which sent shock waves through traditional markets around the world.

However, cryptocurrencies have suffered bigger losses as they are a riskier asset class, so the crypto market may recover faster than traditional markets.

Comparison with previous cycle

Others, including veteran trader Peter Brant and ITC Crypto founder Benjamin Cohen, have compared the latest sell-off to cycles that have seen previous crashes.

Brandt said the same thing happened when BTC fell 27% after the 2016 halving, and compared it to the 26% correction following the 2024 halving.

Cowen compared this to the 2019 market cycle, when crypto assets surged in the first half of the year and then plummeted in the second half.

Bitcoin has fallen 33% from its all-time high to a 2024 low of just under $50,000, a drop that is still very small compared to the 50%+ declines in previous cycles.