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Vanda Research has warned of a broad correction in the cryptocurrency market. Ben Onatibia, the firm’s partner and senior strategist, said that the surge in cryptocurrency prices this year is reminiscent of bitcoin’s rally in 2017.

Vanda Research published a report Monday warning of a broad correction in the cryptocurrency market. The firm’s partner and senior strategist, Ben Onatibia, explained that in 2017 the bitcoin price rise was followed by a correction and a jump in interest in then-lesser known cryptocurrencies. He added that “a broader correction” in crypto markets appears to be brewing.

“The meteoric rise in cryptocurrencies has a whiff of deja vu,” Onatibia described, adding that in 2017 when the bitcoin rally started to wane down, “investors rotated to lesser-known altcoins like ripple and ethereum.” Noting that during that time XRP peaked on Jan. 8 while ETH held onto its gains for another week or two, he described:

In the months that followed, cryptocurrencies cratered as retail investors rushed to the exit.

The analyst explained that now the crypto market is in “precisely the same hot potato game” that took place in 2017. He detailed that “Under the pretext of institutional support, retail investors started rotating out of speculative retail stocks and pouring their money into bitcoin.” Vanda Research said in its note that following the most recent peak, retail buyers have flocked to dogecoin and ether, similar to what happened in 2017.

Onatibia pointed out that despite Tesla CEO Elon Musk’s attempt to boost dogecoin with tweets and mentions on Saturday Night Live (SNL), dogecoin has failed to fully recover. “If and when ethereum suffers the same fate, the cryptocurrencies will likely face a wave of redemptions,” said the macro strategist.

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Emphasizing that “open interest data from different crypto exchanges shows that there has been a rotation from bitcoin to ethereum since the Coinbase IPO,” the strategist opined:

We think a correction in crypto would push retail investors back into equities, where some of their favorite stocks are now trading at a significant discount vis a vis the February highs.

Do you agree with the analyst about an incoming correction in the crypto market? Let us know in the comments section below.

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