Vanda Research has warned that the cryptocurrency market may be heading toward a broader correction, arguing that current trading behavior looks increasingly similar to the late stages of the 2017 cycle. Ben Onatibia, the firm’s partner and senior strategist, said the sharp rise in crypto prices this year carries a clear sense of déjà vu, especially as investors rotate away from bitcoin and into more speculative tokens.
A familiar late-cycle pattern
According to Onatibia, the comparison with 2017 is not simply about strong price gains. It is about what happened after bitcoin’s initial rally began to lose momentum. Back then, investor interest shifted into lesser-known cryptocurrencies, including XRP and ether. He noted that XRP peaked on January 8, while ether managed to hold its gains for another week or two before the broader market eventually rolled over. In the months that followed, cryptocurrencies fell sharply as retail traders rushed for the exit.
That historical sequence, in Vanda’s view, is important because the same type of rotation appears to be taking place again. The firm described the current market as a version of the same “hot potato” game seen in 2017, where capital keeps moving down the risk curve in search of the next explosive trade. Under the narrative of institutional adoption, retail investors first moved out of speculative retail stocks and poured money into bitcoin. After the latest peak, buyers then gravitated toward dogecoin and ether, repeating a pattern that often appears in the more overheated phase of a crypto rally.
From bitcoin leadership to altcoin speculation
One of the more notable observations in the report is the shift in derivatives positioning. Vanda said open interest data across multiple crypto exchanges indicates that capital has been rotating from bitcoin to ether since the Coinbase IPO. For market watchers, that matters because leadership changes inside a bull market can reveal how investor appetite is evolving. A move from bitcoin into ether may signal stronger risk-taking, but it can also suggest that traders are chasing momentum later in the cycle rather than building exposure in the most established crypto asset.
Vanda’s interpretation is that this type of rotation reflects more than ordinary diversification. Instead, it may indicate a market that is becoming increasingly speculative, with retail traders moving toward assets perceived to offer faster upside. In past cycles, these transitions have often coincided with rising fragility beneath the surface, even when headline prices still appeared resilient.
Dogecoin as a warning sign
Onatibia also pointed to dogecoin as an example of that speculative behavior. Despite repeated promotional efforts from Tesla CEO Elon Musk, including tweets and public mentions tied to his appearance on Saturday Night Live (SNL), dogecoin failed to stage a full recovery. In the strategist’s view, that inability to regain momentum may be an early sign that speculative enthusiasm is weakening.
He warned that if ether were to face a similar loss of momentum, the consequences could be more severe for the broader digital asset market. A breakdown in one of the major altcoin leaders could trigger a wider wave of redemptions across cryptocurrencies, particularly if retail traders begin to reassess risk all at once. Such moves tend to accelerate quickly in markets where sentiment and positioning are heavily concentrated.
What a correction could mean for retail flows
Vanda believes a meaningful correction in crypto would not happen in isolation. Onatibia argued that if digital assets pull back, retail money could rotate back into equities, especially into the popular stocks many individual investors favor that are now trading at a significant discount to their February highs. In other words, crypto weakness could alter retail allocation decisions across asset classes rather than remain a self-contained event.
This point fits into a broader macro framework: retail investors tend to chase narrative-driven opportunities, and when momentum breaks in one corner of the market, capital often seeks another area that appears temporarily cheaper or more attractive. If crypto enthusiasm cools, equities could become the next destination for that flow.
Why the warning matters
Vanda’s warning is based less on a single bearish catalyst and more on a combination of historical analogy, retail behavior, and derivatives positioning. The report does not claim that a correction is guaranteed on a specific timetable. Instead, it argues that the market structure now resembles a setup that previously preceded a painful unwind. Bitcoin’s leadership fading, enthusiasm shifting into higher-beta tokens, and speculative narratives dominating retail behavior are all conditions that, in Vanda’s assessment, deserve caution.
For investors, the report is a reminder that strong headline performance can sometimes mask a more fragile internal market structure. When funds start rotating from core assets into increasingly speculative names, the move can be interpreted as confidence—but it can also signal that a rally is entering a more unstable phase. Vanda’s central message is that today’s crypto market is beginning to look a lot like 2017, and that similarity may be a warning rather than a reason for optimism.