The cryptocurrency market is probably the most speculative, largely because it has not had enough time for price discovery, lacks consistent and measurable metrics, and has seen minimal institutional involvement. The crypto market is unique for its overwhelming number of retail investors compared to institutional ones, a rarity in most other markets where institutions lead the way.

This dynamic has led to significant volatility, primarily driven by the emotional reactions of retail investors, more so than in any other market. Periods of optimism have pushed prices to unjustifiably high levels, while moments of pessimism have seen them plummet. For instance, the market took a notable dive in November 2022 with the collapse of FTX, at a time when many considered the market as dead as a doornail.

However, those who went against the grain, taking risks when others could not see the forest for the trees and were overwhelmed with fear, found exceptional opportunities. Warren Buffett’s advice to “be fearful when others are greedy, and greedy when others are fearful” seems tailor-made for the crypto market, even though it was not specifically intended for it. Following Buffett’s strategy would have yielded significant returns.

Looking ahead, we anticipate fewer such opportunities as the crypto market begins to integrate more closely with traditional finance. This convergence suggests that future shifts in market sentiment are likely to be less dramatic, signaling a new phase for the market, particularly for Bitcoin and Ethereum. Specifically, for these two cryptocurrencies, we do not expect to witness another crash like the one in November 2022. While they may experience severe downturns in the future, such events are unlikely to be driven by the same degree of outright fear across the market as seen previously.