Bear Markets Don’t Scare Protocol Developers: CoinDesk 2021 Q2 Review

CoinDesk Research presents its 2021 Q2 Quarterly Review of the cryptocurrency market, exploring trends, developments and new narratives for investors.

AccessTimeIconJul 8, 2021 at 12:45 p.m. UTC
Updated Sep 14, 2021 at 1:22 p.m. UTC

Bears come out of hibernation in the spring, and that was definitely true in the crypto market. Pressure from Chinese regulators on bitcoin mining and renewed attention on the asset’s overall energy footprint pushed prices down overall. At the same time, development in decentralized finance (DeFi), Ethereum and Bitcoin soldiered on. The CoinDesk 2021 Q2 Quarterly Review looks at the data and stories behind those events and more.

During Q2, most of the assets in the CoinDesk 20, a curated list of the assets that are “core” to the market, declined. Bitcoin (BTC) experienced its third-worst quarter ever in terms of price performance. Meanwhile, ether (ETH) finished the quarter up 18.7%.

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Returns for assets in the CoinDesk 20 for 2021 Q2: ETH gained while BTC (and most of the market) is significantly down.

In light of the recent market downturn, CoinDesk Research has created a simple litmus test for determining when cryptocurrencies are entering a bear or bull market. Our methodology is as follows: a change of 20% in the CoinDesk Bitcoin Price Index (XBX), followed by at least 90 days in which bitcoin does not return to its previous high or low.

Why just bitcoin? It’s because bitcoin is the benchmark for the overall market, given its large share of the estimated total market value of all cryptocurrencies. As such, barring a reversal in price back above $64,888.99 by July 13, cryptocurrencies are in the early stages of a bear market.

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Bitcoin bear and bull market trends since 2015.

What may have contributed to a bearish reversal of BTC price trends this quarter was renewed regulatory crackdown from the Chinese government against bitcoin mining operations in the country. The majority of Chinese bitcoin miners were forced to either shut down or scale back operations. As a result, Bitcoin’s hashrate, or the total network computational power, fell sharply from ~170 million to ~90 million terahashes per second, and daily average block times spiked to a record 23 minutes during Q2.

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Average BTC hashrate and price for Q2 2021.

In spite of all the bearish market sentiment and negative news, Bitcoin and Ethereum continued to progress technologically in Q2 with the completion of a “Speedy Trial” for Bitcoin’s Taproot software upgrade and the release of Ethereum’s London upgrade on two Ethereum test networks. The continued development of these protocols highlights the actively changing and evolving value propositions of the largest digital assets.

The DeFi ecosystem also continued to adapt amidst bearish market trends with total value locked increasing roughly 13% over the quarter. Notably during Q2, the amount of ETH locked in DeFi decreased, suggesting a rise in other asset types for DeFi collateral and liquidity such as stablecoins, governance tokens and other fungible ERC-20 tokens.

(Note: We use Bitcoin with uppercase B for the blockchain and bitcoin with lowercase b, or BTC, for the asset.)


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The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.