Did the recent Bitcoin Halving kickstart the bull run?
Hello Boarders,
The long-awaited Bitcoin halving happened on the 19th of April —a significant event that reduces the reward for mining new Bitcoin blocks. Historically, this has influenced cryptocurrency prices dramatically. But even before the halving, one question has been on the mind of every crypto enthusiast: is the bull run here or not?
It's impossible to give a definite answer because there are facts that weigh heavily on either side. However, the first step to answering the question is knowing what a bull run is.
What’s a bull run?
A bull market, or bull run refers to the continual upward price movement in the cryptocurrency market. This period could be several months to a few years and is characterised by explosive growth, high volatility, high market confidence, and increased trading volumes.
Although there's no universal standard, the widely accepted definition is that when prices surge by 20% or more from the previous All Time High (ATH), it’s safe to assume a bull market. Several reasons could result in a bull run but the most common trigger for cryptocurrency markets is the Bitcoin halving.
A great example of a bull run due to the bitcoin halving was in January 2017, when Bitcoin's price topped $1,100 and hit a new all-time high. This occurred one year after the Bitcoin halving event and within a few months, the coin's value had risen to around $20,000. 20x in less than a year, crazy we know!
Similarly, in 2017, the price of Ethereum skyrocketed from around $10 in January to a peak of over $1,400 in December. The bull market in this case was largely driven by the launch of new blockchain applications and ICOs (Initial Coin Offerings) built on the Ethereum platform, as well as media coverage and hype around the technology.
The history of bull runs gives us significant insight into what causes them. It is a simple but complex answer all at once. Bull runs happen when public sentiment is good about cryptocurrencies and this may be due to the bitcoin halving, increased innovations and media coverage, the action of institutional investors or the government, etc. These factors are why it's so hard to predict a bull run, even for analysts.
Why the bull run may be here
Let us explore some reasons that indicate we may be at the cusp of a bull run:
Bitcoin ETFs:
On the 11th of March, this year, Bitcoin achieved an unprecedented milestone by reaching a new ATH of above $71,000. Experts agreed that the catalyst behind this milestone was the SEC’s approval of spot Bitcoin ETFs.
A spot bitcoin exchange-traded fund (ETF) is a financial product that allows ordinary investors to invest in bitcoins without direct crypto ownership. The ProShares Bitcoin Strategy ETF, a bitcoin futures ETF, was the first to be approved by the SEC on Oct. 19, 2021, but the Commission rejected proposals for Spot ETFs until Jan. 10, 2024, when the Commission approved 11 Bitcoin spot ETFs.
Trading for spot bitcoin ETFs began on Jan. 11, 2024, and reached $4.6 billion in volumes on the same day. After the first seven days of trading, the product saw $20 billion in trading volume. Within the first month of launching, spot bitcoin ETFs amassed billions of dollars in assets under management (AUM).
This meant that government regulations favoured cryptocurrencies, public sentiment was very optimistic and cryptocurrencies saw increased demand. For many, this was all the information needed to flag the start of a bull run.
2. The halving effect:
The Bitcoin Halving is a pre-programmed event that occurs roughly every four years (210,000 blocks) and causes Bitcoin's mining reward to be split in half. Only 21 million bitcoins will ever exist, and more than 19.5 million of them have already been mined, leaving fewer than 1.5 million left to pull from.
Limited supply is one of bitcoin’s key features and bitcoin prices usually rise for several months following a halving event. For example, the previous Halving, which took place in May 2020, resulted in 1,000% leaps for around 70 of the top 300 cryptocurrencies. That’s over 23% of the top cryptocurrencies achieving gains of 1,000% or more in 2021 alone.
Since halvings typically result in a price surge for Bitcoin and subsequently, Ethereum and other cryptocurrencies, crypto investors consider a halving to be a precursor for a booming crypto market.
3. The Fear and Greed index:
The Crypto [Fear and Greed Index](https://www.coinbase.com/learn/your-crypto/what-is-the-crypto-fear-and-greed-index#:~:text=and Greed Index-,The Crypto Fear and Greed Index is a tool that,greed (75-100).) provides a score between 0 to 100 and categorises bitcoin sentiment from extreme fear to extreme greed.
If people are predicting bearish market movements and are worried about the future of the crypto market, then the index will point toward fear. However, if people anticipate greater increases in price and have strong positivity regarding the market, then the index will point toward greed.
The index is tailored to the crypto market and is calculated using several metrics, including price volatility, market momentum and volume, and social media sentiment. Many crypto traders use the index to help them find the right time to enter and exit the market.
Right now, the index is tilted towards greed, meaning there’s a lot of positive sentiment and people are feeling bullish. In addition, bitcoin’s sentiment has been overwhelmingly positive for the past two years.
Crypto bull runs are regular events. In 2013, Bitcoin reached an ATH of $1,242 and in 2017, Bitcoin and other cryptocurrencies experienced a massive bull run, with the former reaching an ATH of nearly $20,000. Bitcoin experienced yet another bull run in 2020–2021, reaching an all-time high of over $60,000.
While past performance is not a guarantee of future results, patterns are important tools for prediction and the evidence seems to indicate that a bull run is already underway.
Reasons to be skeptical
All the evidence seems to be screaming “The bull run is here” but we know better than to rush into the crypto market without doing the full research. There are a few reasons to be skeptical of the bull market claims.
One major reason is that cryptocurrencies and stock prices are somewhat correlated. This means Bitcoin price surges are increasingly tied to Wall Street and may suffer the same downswings experienced by the stock market.
Bitcoin and other cryptocurrencies were once seen as a hedge or safeguard against inflation and benefited during the economic crisis. However, from late 2021 into 2022 and through 2023, cryptocurrency prices rose and fell similarly to equity prices. Therefore, current conditions of war and economic instability might adversely affect the crypto market and prevent the bull run.
Moreover, large Bitcoin investors haven't started to buy the dip yet, suggesting that a market correction may continue for a while. A market correction is a temporary reversal in the upward trend of cryptocurrency prices and is often characterised by significant dips in prices by up to 20%. This phase is necessary for the market to find its equilibrium and it often follows periods of rapid price increases.
In addition, public sentiment affects the markets drastically. Events such as the FTX saga and the [trial of Changpeng Zhao](https://www.cnbc.com/2024/02/12/criminal-sentencing-of-binance-founder-cz-postponed-to-late-april-.html#:~:text=a harsher sentence.-,Zhao pleaded guilty on Nov.,pay a %2450 million fine.), Binance's CEO, have reduced trust in the cryptocurrency ecosystem. These high-profile incidents have eroded confidence in the cryptocurrency market and forced old investors to reassess their positions.
New users often inject fresh capital and enthusiasm into the market, propelling prices upward. A decline in the influx of new users could impede the bull run.
Bull run or not
Predicting a bull run is a complex task and this year has been unusual even for crypto. On one hand, Bitcoin saw an ATH even before it's halving but the total market cap of all cryptocurrencies combined is still significantly lower than its all-time high in November 2021. This suggests that overall investment in the crypto market is still down.
Most veterans predict a Bitcoin price range from $100k-250k post-halving and claim that the crypto bull run will run from the Bitcoin halving in 2024 and reach its peak in late 2025. Others advise caution.
So, is the bull run here? The evidence points to a possible onset, but with substantial risks at play, the journey ahead remains uncertain. Buckle up—it’s going to be an interesting ride ahead.
Talk to you soon.
DISCLAIMER: This newsletter is for educational purposes only and is not investment advice or a solicitation to buy or sell any assets. Please do your own research before making any investment decisions