May 24th 2021 - This Time Is Different


In the past few tumultuous days downward price movement of Bitcoin and other cryptocurrencies seemed unstoppable and even the weekend failed to bring expected calm. In such atmosphere many crypto OGs – the people who were supposed to know better – began to ask uncomfortable questions about their ability to recognise market trends. And some on social media even began to complain about getting liquidated.

Cryptocurrency crash, or “correction” as some still euphemistically call it, didn’t represent much of surprise in terms of actually happening. It was its scale that came as a surprise and led many to ask whether the bear market came sooner than usual, or whether there the pattern of cryptomarket supercycles became shattered beyond repair.

Until the crash, many predicted that the market would behave as it had been in 2017. Namely, a upwards trajectory for two years since Bitcoin halving, with altcoins going bananas and number of larger 30-40 % corrections before the bear market starts sometime in late 2021 or early 2022.

But, now, this seems unlikely, and many think about another, earlier scenario of so-called “double top” in 2013 – namely Bitcoin catching ATH only to crash spectacularly and than start another spectacular bull run.

Both those who expected repeats of 2017 or 2021 might be very wrong. History often rhymes but never repeat itself. While this market cycle might have certain similarities with the past, the future is a whole new ballgame and anyone must plan and act accordingly. Basing investment strategies on what happened or worked few years ago might prove to be fatal.

One of examples how catastrophic reliance on past might be was the French strategy before and at the beginning of Second World War. The French believed that the Second World War would play out exactly like the First World War, and they have built their military and defence strategy accordingly, basing in on the long, formidable and static fortifications which were supposed to be impregnable and able to stop the Germans. Billions of francs were spend on the Maginot Line, one of the most famous fortifications in history – the resources that could have been better spent on modern air force, anti-tank and anti-aircraft weapons. When the Germans attacked in Spring of 1940 they applied the strategy og Blitzkrieg, based on tanks, modern air force and dashing manuvres and simply outflanked the Maginot Line and forced France to surrender.

Many of recent market capitulations could be explained with similar reliance on the past patterns and market behaviours. This time is different.

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