The crypto bull run will not last as long as you think

Crypto traders are fueling an explosive rally across financial markets, with Bitcoin surpassing $103,800 for the first time ever in a historic performance.

But let’s not get carried away. This isn’t the first time we’ve seen an explosive bull run, and history shows it can come crashing down quickly, too.

US President Trump’s vow to establish the country as the global crypto hub and his selection of pro-crypto regulators are key drivers of this surge.

Retail traders fuel the frenzy

Retail investors, often the first to arrive at market peaks, are back. A MarketVector index tracking the bottom half of the largest 100 cryptos has more than doubled since Trump’s November 5 election win, far outpacing Bitcoin’s 46% gain in the same period.

But even with these jaw-dropping numbers, the index is still only a third of its pandemic-era peak. This is a critical phase in the bull cycle: the latter half, where big returns are possible but risks are magnified. Breadth and leverage are elevated but not overextended.

NFTs are also seeing a resurgence. The Bitwise Blue-Chip NFT Index jumped 106% in November, its best month since the start of 2022. Even so, the index is far below its record high, proving the fragility of this rebound.

South Korea, a hotbed for crypto activity, saw trading volumes on local platforms hit $254 billion in November. For context, this figure surpasses the turnover on the Kospi, the country’s benchmark equity index.

It’s bullish all over

Trump’s choice for the SEC chair (a known crypto supporter) and the appointment of the first White House crypto czar have made markets bullish all over. Meanwhile, meme stocks like GameStop and AMC are seeing sharp intraday rallies.

As we reported, a cryptic social media post from Keith Gill, the infamous “Roaring Kitty” of the 2021 investing craze, added to the frenzy.

Bitcoin’s record-breaking week coincided with the Dow Jones Industrial Average nearing 45,000. Investors are pouring into everything from junk bonds to stocks, initially driven by easy monetary conditions.

MicroStrategy has become the poster child for this speculative mania. The company’s stock has soared 464% this year, driven by its massive Bitcoin holdings worth around $41 billion.

MicroStrategy plans to buy another $40 billion in Bitcoin, funding these purchases through convertible notes that investors can exchange for equity if the stock price rises.

This strategy is as risky as it is ambitious. If Bitcoin prices drop, the impact on MicroStrategy’s stock could be catastrophic. The parallels to the meme stock rally of 2021 are unmistakable—everything works until it doesn’t.

Signs of froth are everywhere. Bank of America’s Michael Hartnett pointed out that the S&P 500’s price-to-book ratio is now at 5.3, just shy of the 5.5 peak during the 2000 tech bubble. He warns of an “overshoot” in early 2025 if the S&P 500 climbs another 10% to 6,666 points.

Bitcoin’s market cap now exceeds $2 trillion, making it comparable to the world’s 11th-largest economy. But while investors may be partying like it’s 2021, history suggests the music will eventually stop.

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