Are We in the Next Big Bull Market?

The total cryptocurrency market capitalization has rapidly surpassed $2 trillion, with Bitcoin and inflows from the ETF leading the charge. Altcoins have followed closely behind and have seen even greater gains than Bitcoin over the past few weeks. With all of this price mania happening at a relatively expected time a few months before the halving and after the Bitcoin ETF release, the primary question on investors’ minds is if this rally will continue until crypto sees new all-time highs. 

The cryptocurrency market has been stagnant or declining for the past three years. In that time, there have been disastrous black swan events, like the bankruptcy of FTX and the collapse of the Terra stablecoin. The rapid price decline and subsequent fraud exposed in the industry caused the general public to dismiss blockchain and cryptocurrencies as a fad reminiscent of the COVID era of 0% interest rates, stimulus checks, and rampant market speculation. However, true believers continued developing the infrastructure, applications, and protocols that will provide the basis for the next generation of the Internet.

Indeed, over the past few years, blockchain has inched closer to its goal of being mass market-adoptable, easy to use, and cheap to build on. Though none of these goals are yet to be fully completed, the market is warming up yet again to the idea that blockchain will provide the groundwork for our future financial and network-based systems.

The primary driver of this most recent bull run is most likely the Bitcoin ETF, which was released in early January but has been speculated upon for several months prior. The significance of Bitcoin trading in traditional financial markets cannot be overstated. For the first time, massive financial institutions and corporations can easily add Bitcoin to their balance sheet. This has caused Bitcoin to double since October 22nd from $30,000 to $60,000, almost at its 2021 all-time high of $65,000.

Previously, crypto bull markets were cyclical in nature. There would be three years of mediocre price action, then one massive bull market that came a few months after the Bitcoin halving, when the amount of Bitcoin distributed to miners per block is halved. This year, the halving is anticipated to occur sometime in April, which has caused some confusion about why the markets are already extremely hot. This early start can almost certainly be attributed to the institutionalization of Bitcoin and the greater regulatory clarity around digital assets, as evidenced by the XRP lawsuit victory and Uniswap’s decision to turn on dividends to UNI token holders.

Given that this cycle is unprecedented regarding the general public and the financial industry’s access to cryptocurrencies, it is certainly more difficult to predict what will happen next. On one hand, it feels like this bull run is just getting started, as there has been little to no mainstream press or attention on Bitcoin, and there will likely not be until it hits a new all-time high. Additionally, with the supply shock that the halving will cause and miners continuing to battle for more computing power, this could begin an arms race to accumulate Bitcoin rapidly. The potential of an Ethereum ETF, which will likely be approved sometime between May and August, will supercharge the market even more and potentially have a similar impact on Ethereum’s legitimization and adoption as it has for Bitcoin.

With all this being said, it must also be acknowledged that there could be another correction before the crypto market reaches new highs. As previously mentioned, though significant progress has been made technologically since the last bull market, we are still at least a few years away from the point where this technology and related aspects like DeFi are easily accessible to a non-crypto native audience. Furthermore, the Bitcoin halving could finally be a “buy the rumor, sell the news” event where the price is already baked in and will dip upon the halving itself. If investors and the general public expect massive returns post-halving, this disappointment could cause them to get jaded with the cryptocurrency market, much like in 2021, and quickly lose interest.

Only time will tell if this is the next 2017 or 2021. The interest in Bitcoin from large financial institutions has never been higher, and future events like the Ethereum ETF and Bitcoin halving promise to be significant events regardless of price action. Yet, the market seems incredibly greedy and is generally following the S&P as it reaches new all-time highs, so macroeconomic factors and the general speculative nature of Bitcoin cannot be ignored. Regardless, now is undoubtedly a fun time to be in the crypto space.

By Lincoln Murr

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