Crypto market wash in 2017: Why altcoins fell the deepest, but confidence was the most easily shaken

After the regulatory shock of September 4, 2017, the cryptocurrency market experienced a profound cyclical cycle. At this historical juncture, the performance of different assets presents very different characteristics. Bitcoin has rebounded 7 times in a short period of time, while altcoins have suffered an 80% decline, and new coins born after the 1990s have risen hundreds and thousands of times. This extreme differentiation reflects not only market dynamics but also differences in participants’ psychological structures.

The market truth about altcoins exposed in extreme volatility

In the four months from September 2017 to the end of the year, the total market capitalization of the cryptocurrency market completed a fivefold increase from $15 billion to $80 billion. This speed has overshadowed traditional financial markets. In contrast, the current global gold market size is about $22 trillion, and the U.S. stock market has reached $37 trillion, which are stock markets with limited room for growth. As an incremental market, the cryptocurrency market, although its total size is still in the order of $30 trillion, its growth potential has attracted a steady influx of funds.

During this rally, altcoins tend to perform the most violently. Compared with mainstream currencies, altcoins lack sufficient liquidity support, have more room for market manipulation, and retail sentiment is the most easily stimulated. Once market sentiment reverses, altcoins often bear the brunt of the sell-off, falling far more than Bitcoin and Ethereum. This characteristic makes altcoins both a leading indicator of market launch and a magnifying glass of market risk.

The Human Game in Market Cycles: The Trap of Going Long and Short

Looking at market history, it is not difficult to find that whenever a bottom is formed, the sound of short singing is often the loudest. During the Bitcoin bottom period, criticism drowned out investors’ rational thinking, with many turning to gold or the U.S. stock market for a sense of security. A similar story happened with Ethereum - when it was in trouble, everyone discouraged new entrants, but when it reached the high again, these voices disappeared in an instant and became a chaser.

The key is that breakthroughs in market structure are the decisive force. When the structure is still tied up, even a rise will attract a large number of “paper hand” investors. These people lack the determination to hold for a long time, and once the market fluctuates, they will be easily shaken out of the market. And the real “diamond hands” have long been lying in ambush at the bottom, waiting for the moment when the structure breaks.

The correction in mid-October 2017 was not a real market cleansing. The market has witnessed an extreme decline of 99% within 45 minutes, followed by a rapid rebound. Such flash crash events often signal large volatility on the horizon. Before the start of the altcoins market, a large number of long positions were blown up; After the market starts, short positions are also doomed. Bitcoin, Ethereum, and even the entire altcoins sector follow the same pattern - liquidation targets are constantly rotating according to market direction.

Shocks Before Structure Breakdown: Identifying the True Market Bottom

The rupture of the market structure is necessary to absorb more participants. Panic washes can keep hindsight investors out of the market, while those who understand the logic of the market are always ahead of the curve and follow the general trend. This is why the essence of what drives price increases is always a trend, not an isolated event.

As early as three months ago, prominent industry analysts predicted that the total market capitalization of cryptocurrencies would reach at least $7.5 trillion. This prediction is based on a deep understanding of market cycles. Over the next three or four months, the process of capitalization of the market accelerated like a rocket. In order to destroy the fluke mentality of both bulls and bears at the same time, the market carefully designed this series of liquidation events. Because of this, industry insiders clearly advised at the end of June: do not use leverage and avoid participating in short-term trading.

The logic of altcoin recovery: Why cycles always repeat

When enough time has passed, participants will finally understand the essence of this market: everything on the surface is illusory, only cycles and human nature are eternal. Although altcoins face severe tests in each cycle, they will also have the opportunity to be reborn in the cycle cycle. Every wash in the market is to purge out those participants who lack confidence and accumulate momentum for the next round of rise.

This is the iron law of the crypto market: whether it is altcoins or mainstream coins, as long as the market has not broken its structural constraints, all volatility is only part of the cyclical cycle. And those investors who have gone through multiple cycles and still stick to it will eventually see their confidence verified.