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Gm Semilore,
As markets experienced significant volatility with BTC retracing 7.3% and ETH down 13.8% this week, investors are increasingly wondering whether the current bull cycle has already peaked.
Are we are undergoing similar market downturns as the ones experienced after the previous bull market in late 2021? By examining halving cycle patterns, stablecoin market capitalization, and DeFi protocol growth trends, we can identify where we truly stand in this market cycle and what historical on-chain metrics suggest about the runway ahead
Network Fees - Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether
Bitcoin fees have once again decreased this week despite the significant market shifts, reaching levels not seen since Sept '24
Ethereum fees followed the same path, with levels as low as Aug '24
Exchanges Netflows - The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
BTC marked $840M in exchange inflows, signaling a strong selling pressure
ETH in the other hand marked outflows of $818M, probably a mix of buying activity and DeFi position covering
Is the Bullrun Over Already?
Examining key historical metrics helps identify late-stage bull market patterns. On-chain data provides historical context to spot structural similarities with previous cycles. These recurring patterns offer valuable signals for navigating the current market environment. So here is a set of metrics that can be relevant to understand we are at:
BTC Performance by Halving Cycle - the chart shows the price performance of Bitcoin following each halving event, measured as percentage change over time. This shows that:
Post First Halving (blue line): Shows the strongest performance, reaching peaks around 8,000% with significant volatility. After initial dramatic growth, it settled into a range between 1,600-4,000% appreciation
Post Second Halving (pink line): Shows substantial but less dramatic growth compared to the first halving, with peaks around 2,000% before stabilizing between 400-1,600%
Post Third Halving (yellow line): Demonstrates more modest growth, generally staying below 600% appreciation.
Post Fourth Halving (orange line): Shows the most modest performance so far, with the usual initial period of negative returns. Its peak has been about 60%
Diminishing returns pattern: Each successive halving appears to produce smaller percentage price increases, suggesting a maturing market with decreasing volatility and growth potential over time.
Historical data suggests the fourth halving cycle is likely to continue the pattern of diminishing returns we've observed across previous cycles. While the third halving produced returns approaching 600%, projections for the current cycle indicate more conservative appreciation in the 50-150% range, aligning with market maturation trends.
Previous cycle data reveals a consistent pattern where price peaks typically materialize 12-18 months post-halving event. Extrapolating this pattern to the current cycle would position potential appreciation momentum between mid-2025 and late 2025. However, investors should note that market dynamics have evolved substantially, with increased institutional participation and regulatory developments potentially altering traditional cyclical behaviors.
Stablecoins Market Cap vs BTC Price - The chart reveals a compelling relationship between stablecoin market capitalization and Bitcoin price movements that investors should be monitoring more closely.
Historical Context: Looking at the historical data, one of the most striking observations is how the previous stablecoin supply peak in April 2022 (reaching $187B) coincided precisely with the onset of the last bear market. This is no coincidence. As Bitcoin tumbled from its $69,000 high in November 2021, we witnessed stablecoin supply reaching its zenith before declining steadily through 2022 and 2023.
Current Situation: This cycle we have not yet seen a comparable peak in stablecoin supply despite BTC recently setting new all-time highs above $100,000. Currently, stablecoin market cap appears to be on an upward trajectory, sitting at $219B.
Mid-Cycle Indicators: This divergence suggests we may still be in mid-cycle rather than at its conclusion. If historical patterns hold, we could reasonably expect:
Additional runway for Bitcoin price appreciation as we haven't yet reached the stablecoin supply peak that traditionally signals cycle tops
A possibly higher ultimate peak for both Bitcoin and the overall market before stablecoin supply reaches its cyclical maximum
Important Caveat: It's worth noting that stablecoins have not been present during all crypto bull runs. They're a relatively recent phenomenon in crypto market dynamics and current market conditions differ substantially from previous cycles, with institutional adoption, ETF trading, and a maturing market structure creating a different environment.
Balancing Convenience and Risk With Stablecoins
Stablecoins process around one trillion dollars in monthly transactions, but not all of them operate on the same footing. In this article, we delve into the varied models behind stablecoins and shine a spotlight on the leading players in today’s market.
Historical Number of DeFi Protocols - The chart reveals the solid evolution of the number of DeFi protocols across multiple crypto market cycles, showing how innovation waves have corresponded with broader market sentiment.
Early DeFi (pre-2020): Minimal activity with very few new protocols launched, indicating DeFi was essentially non-existent during the 2017-2018 bull market
DeFi Summer (2020-2021): Significant acceleration in new protocol launches coinciding with the beginning of the 2020-2021 bull market
Peak Innovation (Late 2021): Record-breaking spike reaching nearly 70 new protocols in a single week during market euphoria when Bitcoin approached $69,000
Bear Market Resilience (2022-2023): Despite price declines, consistent protocol launches continued at 20-40 per week, showing stronger ecosystem foundation
Current Cycle (2024-2025): Steady but more measured protocol launches without the extreme spikes of previous cycles, suggesting greater market maturity
Total Growth: Existing protocols (blue line) have grown consistently from near-zero to approximately 5,500, regardless of market conditions
Based on this chart, the current trajectory differs significantly from the previous bear market. We're not seeing the dramatic spike in new protocol launches that characterized the euphoria late 2021 market top before the crash. Instead, new protocol creation remains steady without the peaks that typically signal market exhaustion. This suggests we're experiencing a more mature phase of the cycle rather than showing the warning signs that preceded the previous market reversal. The absence of frenzied development activity indicates this bull run may have room to grow before reaching the excessive optimism that historically precedes major corrections.
In conclusion, the data presents a mixed but cautiously optimistic picture: we are observing fewer of the traditional late-cycle signals like frenzied development activity, stablecoin market cap exhaustion, or extreme exchange inflows. However, historical analysis must be approached with healthy criticism, as each market cycle brings unique variables and structural changes. The fourth halving cycle appears to be following the pattern of diminishing returns, with historical timelines pointing to potential appreciation momentum through mid-to-late 2025, but as always, past patterns are no guarantee of future performance.
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In our next webinar, we dive into the main factors likely to drive DeFi into an institutional era. We also evaluate potential risk factors and provide a vision for how the space is likely to continue evolving.
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