Beyond the Hype: A Detailed Look at Bull Crypto Cycles and Their Influence on the Cryptocurrency Ecosystem
Cryptocurrency is a volatile and rapidly evolving industry that is experiencing a constant ebb and flow in its prices. Market cycles in the cryptocurrency market typically begin when investors accumulate cryptocurrencies when prices are low, steadily increasing their value. When prices reach their peak, investors begin to offload their assets, initiating a downtrend. This cyclical pattern leads to bull and bear market cycles. A bull cycle is identified when the prices of cryptocurrencies constantly rise for a prolonged period of time. During bull cycles, the majority of investors are bullish, demand outweighs supply, and market confidence is high. Other factors, such as bitcoin halving, institutional investors' participation, interest rates, and innovations in the crypto industry, can also trigger bull cycles.
Bitcoin, the most famous cryptocurrency, has experienced three major bull runs in its history. The first major bull run was observed in 2013 when the value of Bitcoin surged nearly 6000 percent, rising from $12.5 at the start of the year to $754 by the end of the year. Consequently, the crypto market capitalisation also increased to $1.2 billion. The main reasons for soaring crypto prices in 2013 were the rising popularity of Bitcoin, increased transactions on crypto exchanges, and growing demand for Bitcoin in China.
After the 2013 bull run, Bitcoin prices fell sharply and traded between the $300-$400 range, from 2014 to 2015. The slump followed news that China had put a blanket ban on crypto trading, limiting investments Chinese individuals could make in cryptocurrencies. However, Bitcoin gradually spiked to $500-$600 in mid-2016 and crossed the $1000 range towards the end of the year. In December 2017, prices peaked at $20,000, marking the second major Bitcoin bull run. During the same period, a growing number of crypto exchanges cropped up around the world, offering investors a chance to trade cryptocurrencies. The emergence of stablecoins and growth in Ethereum's smart contract technology contributed to the positive sentiment during the same period as well.
Bitcoin prices declined after the 2017 bull run and entered a markdown phase in 2018. Throughout 2018, Bitcoin traded between $3000 and $5000. Many causes appeared to have prompted the bear run, including inflation and economic concerns, the SEC denying Bitcoin ETF registration, and digital behemoths Facebook and Google prohibiting ICO ads and token sales on their platforms. However, technological innovations in the industry continued to advance despite weak crypto prices. By the end of 2020, the NFT and blockchain gaming industries became the next big trend in the sector. On the back of these innovations, Bitcoin prices skyrocketed to almost $65,000 in April 2021, marking its third major bull run.
The 2021 crypto boom faded in the second half of the year, and weak prices continued to feature in 2022 amidst worsening macroeconomic conditions and tightened monetary policies. At the same time, the crypto witnessed major crashes, such as the fall of LUNA and the bankruptcy of prominent crypto exchanges like FTX, Celsius, and 3AC, among many others. This had a detrimental effect on investor confidence. Eventually, the total crypto market capitalisation plummeted to $900 million in 2022, from a peak of $3 trillion market cap in 2021.
However, since early 2023, the situation seems to have improved. In December 2022, Bitcoin was trading at $16,000, but its price has recovered to over $26,000 as of May 15, 2023. In April 2023, Bitcoin briefly surpassed the $30,000 level as well.
Dan Morehead, the CEO of asset management firm Pantera Capital, believes that currently, blockchain assets have reached their lows and the industry is in the next bull market cycle, regardless of what happens in the interest-rate-dependent traditional asset classes. This optimism reflects the belief that the crypto industry has matured and gained more recognition as a viable investment option.
On the other hand, global investment management firm Bernstein has reported that the new crypto cycle is still not fully recognized, despite positive factors such as macro catalysts, new bitcoin mining cycles, Ethereum upgrades, and developments in layer-2 scaling solutions like Arbitrum. While there are indications of a potential bull cycle, it is important to approach the market with caution and conduct thorough analysis.
It is worth noting that accurately predicting the exact timeframe of any bull crypto cycle is nearly impossible, and investors must be cautious of falling for false signals known as bull traps. Bull traps occur when the price of an asset briefly rises after a prolonged period of decline. This price action can deceive traders into believing it is an opportunity to place long positions, only to suffer losses when prices decline again.
To navigate the cryptocurrency market successfully, it is essential to continuously monitor key metrics and indicators. Metrics such as total volume locked (TVL), daily active addresses (DAA), funding rates, and spent output profit ratio (SOPR) can provide valuable insights into market sentiment and trends. When combined with technical and on-chain analysis, these indicators can help investors observe patterns and make rational investment decisions.
Furthermore, staying informed about technological advancements, regulatory changes, and industry news is crucial for understanding the broader market dynamics. The cryptocurrency market is highly influenced by external factors, and being aware of these developments can contribute to making informed investment choices.
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