Financial markets are inherently unstable. Whether it’s the traditional stock market or the newer cryptocurrency market, you never know when prices are going to tumble or when they are going to skyrocket. If you’ve been investing for a while now, then you’ve likely seen your share of bull and bear runs.
However, there are key differences between the bull runs of the stock market and the crypto market. For starters, cryptocurrencies are a lot more volatile. The end of 2021 and the beginning of 2022 have not been good for the crypto market. We are officially in a bear market. All of this begs the question: when is the next crypto bull run coming?
What is a Crypto Bull Run?
One of the fundamentals of economics is that there is a price increase when demand outpaces supply, and this rule applies to all commodities, assets, and consumer goods. When demand is greater than supply in the crypto market, we enter what we call a bull run.
Coinbase provides a succinct definition of a bull market (the terms are often used interchangeably):
A bull market, or bull run, is defined as a period where the majority of investors are buying, demand outweighs supply, market confidence is at a high, and prices are rising. If in a given market, you see prices quickly trending upwards, this could be a sign that the majority of investors are becoming optimistic or “bullish” about the price increasing further, and may mean that you’re looking at the start of a bull market.
Bull runs can be both sudden and gradual. There can be a sustained upward slope in prices over a long time. Alternatively, there can also be a sudden spike in prices (greater than or equal to 20% is the accepted range). As you might have guessed already, bull runs are good for the market. However, bear runs are also good for the market, as they can help reign in exaggerated bull runs, provide a better picture of risk tolerances as a result of lean(er) periods, and enable traders to invest at lower prices.
Investors play the most important role in determining how cryptocurrencies gain value, which can therefore trigger bull runs more than any external social or political factor. However, social and political factors do impact how investors buy or sell. It seems an obvious point, but it’s worth repeating: when the financial climate seems favorable, more investors buy cryptocurrencies. As more people buy cryptocurrencies, prices increase.
Even a few key investors (typically referred to as “Whales”) can trigger bull runs. For example, MicroStrategy holds around 121,044 bitcoins. If MicroStrategy decides to start selling its holding, there would be a surge in supply, which would likely be enough to single-handedly trigger a bull run. Bloomberg speculates that this is exactly what happened in 2017 when a lone whale fueled a surge in the price of BTC.
However, crypto news sites such as the Bitcoinist have been wondering about the apparent case of the disappearing Bitcoin whales. In an article from a year ago, they wrote,
Bitcoin price is sinking slowly from highs set over a week ago now, and bullish momentum is showing signs of waning. The peak of the bull market isn’t expected by most analysts for some time, however, a sizable reduction in BTC wallets with a balance of 1K or more coins, could be signaling a bear market is coming sooner than they expect.
If it all sounds just a little bit too confusing, then the website Hard Fork provides a quick summary of cryptocurrency whales, bears, and bulls.
Previous Crypto Bull Runs
When Satoshi Nakamoto brought the idea and technology behind Bitcoin to the world, its value was $0. By 2010, the price had increased to $0.09. By October of 2010, the price went up to $0.10. An 11% growth in less than a year is impressive but is far from a bull run.
In 2011, Bitcoin had its first bull run, with its price increasing from $1 to $32—a breathtaking growth of more than 3200%. However, such astonishing numbers were short-lived. By November of 2011, the price of Bitcoin was down to $2. While 2012 was far from a year of drastic bull runs for the crypto market, Bitcoin managed to end the year at $13. On a one-year scale, the growth was significant by any measure—650% (you won’t find that kind of growth in stocks and metals).
By 2013, Bitcoin had touched $1,000 before falling back to $530. Here again, we can see another year-long bull run with a growth of 4076% (yes, you read that correctly). No other asset class was growing at a rate even remotely close to this figure. Between 2014 and 2016, though, Bitcoin had entered a bear run with significant price fluctuations. The price of BTC hit $1000 only in May 2017. On 17 December 2017, Bitcoin’s price briefly reached a new all-time high of $19,783.06. Days later, on 22 December 2017, the price of BTC fell below $11,000, a drop of 45% from its peak. Bulls and bears had led to a cryptocurrency bubble.
Nevertheless, Bitcoin continued to silence even its most vocal critics. Post-2020, the value of Bitcoin reached new ATHs (all-time highs), at one point achieving a price of $29,374. In 2022, the price of Bitcoin went up to $64,000, which signaled a massive bull run that has since cooled. At the end of 2021 and into the beginning of 2022, Bitcoin “dipped” as low as $35,000, and countless cryptocurrency memes flooded the space poking fun at BTC’s wild rollercoaster ride of value.
While the overall price of Bitcoin has increased year on year, there have also been massive fluctuations. Nevertheless, there has been growth through thick and thin. Presently, we are witnessing a bear run, as Bitcoin prices hover around $41,367.80. If history is any indication, all bear runs are followed by bull runs, which is precisely what so many Bitcoin maximalists have been saying throughout BTC’s turbulent swings in value.
Factors That Might Cause a Crypto Bull Run
Several important factors might cause the next bull run. Let’s take a look at some of the more important ones.
Governmental regulations
Governments remain polarized about cryptocurrencies, with some like China banning them outright, while others such as El Salvador buy the BTC dip to the tune of $15 million. Virtually no other government has been as enthusiastic as El Salvador, government regulation can make it much easier or prohibitively difficult for some to trade and own cryptocurrencies.
Fiat currency inflation
As NBC News and others have reported, the Turkish Lira lost approximately 47% of its value in the last full year. Inflation in the United States has also increased significantly, edging just below a forty-year high of 8%. Globally, most fiat currencies have faced inflation. If more people take to Bitcoin as a hedge against inflation, we might enter the next bull run.
Altcoins
For most people, Bitcoin is the face of the cryptocurrency market. But there are tens of thousands of other cryptocurrencies in existence, and the number is only expected to increase. If altcoins can make it big among investors, the overall crypto market can enter a bull run, which could very well be triggered by specialized altcoins that work on specific projects. Or it could even result from the next Ethereum killer.
Scarcity
Another important factor, particularly when considering BTC, is halving. Bitcoin halving is a process through which the production of new Bitcoins is made more difficult. As a result, fewer Bitcoins are being mined. History shows that after every halving, there has been a spike in Bitcoin prices. The next halving event will happen in 2024, and many expect to enter another bull run then.
Factors That Might Delay a Crypto Bull Run
Most of the factors that can cause a bull run can also delay it. As Investopedia describes,
The causes of a bear market often vary, but in general, a weak or slowing or sluggish economy, bursting market bubbles, pandemics, wars, geopolitical crises, and drastic paradigm shifts in the economy such as shifting to an online economy, are all factors that might cause a bear market. The signs of a weak or slowing economy are typically low employment, low disposable income, weak productivity, and a drop in business profits. In addition, any intervention by the government in the economy can also trigger a bear market.
A global regulatory backlash against cryptocurrencies would make a bull run far more difficult, as might the persistence of the COVID-19 pandemic and the ongoing Russian war against Ukraine.
Predicting the Next Crypto Bull Run
Wouldn’t we all like to be able to predict the next bull run! If you’re Vitalik Buterin, the founder of the Ethereum network, bear runs are indeed good for cryptocurrencies, as they give developers the chance to work on the underlying technology since there is less short-term speculative attention.
Some reports have also suggested that the next bull run will come in 2024, which coincides with the Bitcoin halving event. Others urge traders not to expect another BTC bull run until 2025. There are also claims of Bitcoin crossing $100,000 shortly.
As we gaze into our crystal ball, we can say one thing with absolute certainty: the next bull run will come in the near or distant future.
Conclusion
In many respects, bull and bear markets are irrelevant to seasoned traders, who have little interest in chasing trends, money, all-time highs, or performance metrics. Rather, the smart trader manages to set clear and realistic expectations, build and optimize an effective automated trading system, and keep a clear eye on the future of cryptocurrencies.
When armed with the right knowledge, experience, and trading tools, the seasoned trader will be well equipped to weather bear markets and profit from bullish ones.