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What Will Trigger the Next Crypto Bull Market?
September 6, 2022
What Will Trigger the Next Crypto Bull Market?
September 6, 2022
What Will Trigger the Next Crypto Bull Market?
When the crypto market is the way it is right now, thoughts of a bull market are very far away.
However, those who have experienced a crypto market before are already planning for the next cycle and working out how to make the most of the opportunities a bear market undoubtedly provides.
The big question for most is what exactly will kick start the next bull market? The answer is, sadly, that there isn’t one single thing that will turn the light from amber to green, but there are signs we can look for that the tide is turning.
Embrace the Capitulation
The first tell-tale sign that a new crypto bull market could be imminent is, oddly, the exact opposite of what we would expect – a flash crash.
History has shown on multiple occasions that Bitcoin has a tendency to have a long, drawn-out period of boredom towards the end of a bear market, followed by a quick and sizable price drop.
These drops, also referred to as ‘capitulation’, have historically been sparked by major events which amplify the fear already felt after a long and brutal bear market and exacerbate the selling.
These capitulation events are designed to flush out any weak hands left in the market and scare people into selling their bitcoin, to be picked up by grateful whales who know what’s coming next.
From Silk Road to COVID-19
The first of these events happened in August 2012, when Bitcoin was slowly recovering from its first bear market. It had peaked at $30 in June of 2011, at which point a year-long bear market ensued.
By August 2012 it had started to climb back up, hitting $17, until a seismic drop saw it lose 57% of its value over three days. The drop was caused by the collapse of a huge Bitcoin scam called Bitcoin Savings and Trust, a pyramid scheme that ended up taking some 700,000 bitcoin from investors.
This capitulation allowed those waiting in the wings to pick up cheap bitcoin, acting as the starter pistol for a rally that took Bitcoin from $7 to $258 within eight months. This topping out led to a six-month bear market that saw the price come down to $64, before it started to creep back upwards again.
Then, in October 2013, news broke that Ross Ulbricht, the founder of illicit online marketplace Silk Road, had been arrested and the site seized. This caused the Bitcoin price to crash 33% in a single day, with many predicting it was not just the end of the recovery but the end of Bitcoin.
This was not just wrong but spectacularly inaccurate – the price recovered in just 10 days, and the capitulation event led directly into a 10x move that finished off the 2012/13 bull run in fine style, with Bitcoin valued at over $1,000.
We have one final example when the same set of circumstances, a bear market, boring price action, and a capitulation event, combined to fuel a bull run.
In early 2020, with the world gripped by the potential impact of the coronavirus, Bitcoin copied the stock market and experienced a COVID-inspired 52% crash from $8,000 to $3,850 between the 12th and 13th of March.
This followed a bear market that had been in play for over two years, and whales were clearly ready for the good times to roll again – the amount of bitcoin bought on March 12 was the biggest single-day purchase since May 2017.
Of course, it proved to be a wise move – the March 2020 flash crash set off a year-long bull market that took Bitcoin to $69,000 by November 2021.
As we can see then, whales are very good at manipulating amateur investors through a bear market, using negative new events to frighten people into selling, right when they should be buying.
So if Bitcoin has been in a bear market for a long period of time and a major news story causes a large crash, there is a very good chance it is the precursor to a bull market.
The Bitcoin Halving
There are also positive events that can help kickstart a crypto bull run. The ‘halving’, where Bitcoin’s mining reward is cut in half, has traditionally been seen as a harbinger of good times. Again there is a striking pattern that can help us predict what might happen and when.
Bitcoin’s halving occurs every four years, and historically the halfway point between two halvings has coincided with the start of a bear market – the last three halving halfway points have all precipitated months-long price collapses of between 33% and 67%.
What happens next is the long and drawn-out passage of boredom and flash crash we described earlier, with price slowly gaining momentum until the halving itself. History shows that the halving acts as the accelerator to the recovery, helping turn it into a fully-fledged bull market – the November 2012 halving was followed by a 10,000% price increase over the next year; the May 2016 halving led to a 4,000% price increase over 18 months; and May 2020 halving led to a 666% price rise, again over 18 months.
The next Bitcoin halving is slated to take place in May 2024, and the signs are already looking good; Bitcoin passed the halving halfway point in May this year and has already seen a 50% price drop, well in line with historical precedent.
If history repeats itself, we can expect a very boring 2023 followed by a capitulation event late in the year, a steady recovery into the halving in 2024, and a rocket ship all the way to late 2025.
When is the next crypto bull market?
Of course, we can never predict that things will play out just as we have described, but if they didn’t then it would be going against historical precedent. What we do know is that Bitcoin, and crypto in general, is far from finished, and another cycle is expected by everybody who has been in the space for some time.
As the saying goes, history doesn’t always repeat itself, but it often rhymes.
