Let’s compare this bull run with precedent ones, notably 2017, 2013, and 2011.
Even if all bull runs are different, there are always similarities. The market goes up or down. Maybe some sideways action too. Either way, it never continues to go in only one direction indefinitely. Do your own research and manage your risk accordingly. What is different than in 2017? Why is this bull run so different as people say?
The halving event
Every four years, the rewards for mining a new block on the Bitcoin protocol diminishes. This reward is halved by 50% every cycle, meaning BTC gets more scarce. This scarcity is programmed, like a clock, and nothing will ever stop halvings. There will only be 21 million Bitcoins ever. And year after year, the difficulty of mining also accentuates, putting a lot of pressure on miners to keep profitability.
We can see that in mid-2011 Bitcoin had its first real bull market. Volume was rising rapidly, the savviest people were interested in this new technology. But then, Bitcoin was still it’s in its infancy. And then, by 2014, the events at Mt. Gox, one of the world’s first crypto exchanges, would send Bitcoin’s price tumbling to levels never seen before.
The fall of Mt. Gox
For example, the price fell from $850 to $580 after the Mt. Gox hack, a decline of 32%. after the exchange claimed to have lost 850,000 Bitcoins in a hack and filed for bankruptcy in February 2014. The first real bull market was after the 2nd halving, midway through 2016.
It consolidated until mid-2016 when the second halving occurred. At this point, BTC was becoming more mainstream. Everyone and their moms wanted in on this new digital currency, as the price kept going up and up. Until Bitcoin hit the $20,000 dollar mark. The top of the bull run was in.
After the first halving, Bitcoin topped about one year after. As for the 2nd halving, it dipped about one year and a half after the halving event. The 3rd and last halving occurred on May 11th, 2020, or about a year ago. After each halving, the top seems to take more time to manifest, which could indicate we are still early in this bull run.
Some factors can modify the rhythm of these cycles, by either extending or shortening them. It can also be exacerbated in amplitude, as adoption grows to unprecedented levels.
The big bad virus
Ever since corona hit the world and global economies last year, governments and central banks worldwide have been hard at work printing money in quantities never seen before. And it’s raising concerns about upcoming inflation that could arise in the next few months or years.
By printing so much money, they probably avoided the worst-case scenario, a complete collapse of the economy. But it comes with its downsides and potentially unforeseen consequences. The measures were also mostly helping finance and big corporations. This is manifested by the bull run in equities that occurred last year. But the economic reality might be more worrisome. It might take years to completely recover. And people are looking for safer assets to grow their portfolio.
Enter Bitcoin. Even more scarce than gold, easily divisible and almost instantly transferable to somebody else, no matter how far he is. And the smart money and institutions have caught up, and governments too. Crypto is getting heavily regulated from every side.
Bitcoin is cannibalizing traditional finance, and the bankers aren’t happy. It will be nearly impossible for them to keep up with DeFi (Decentralized Finance). People are realizing the intrinsic value of BTC and all the ecosystems that have spawned because of its success.
The traditional media is changing its tone
Why changing their tone? Because when the traditional mass media used to talk about Bitcoin, it was always in a negative manner, and almost exclusively in a negative manner. Trying to “warn” potential investors about the volatility of the asset, or the way it was used. Here is an example from the British newspaper The Guardian from 2017, announcing Bitcoin lost 25% of its value. From its inception up until recently, Bitcoin was often associated with shady and dark corners of the internet.
But now, it’s different. Nowadays we hear about its fundamentals, its supply, its highs, and lows, we hear about every single aspect of the cryptocurrency. We hear negative, neutral, and positive coverage from media that wouldn’t have dared to even mention the coin in an article. Like the one who shall not be named, in Harry Potter’s universe.
The rising value of Bitcoin lately has for sure brought speculators into the space, who are only looking to make a quick buck. But it also has made people like me question their financial system and currency. The government keeps devaluating its own currency by printing so much money, inflation is not a new phenomenon.
But now, you can use this digital coin, which is decentralized and deflationary, as a medium of exchange. It doesn’t take a rocket surgeon to see Bitcoin‘s value.
Institutions are pouring money in
This is probably the biggest difference in this bull run compared to 2014 and 2017. The arrival of prominent institutional investors, who are acquiring and holding enormous quantities of satoshis. Traditional finance is slowly mixing with cryptocurrencies, everything is being tokenized, everything is being shared on the open ledger.
Big structures are taking positions on BTC or blockchain projects. From Amazon to Facebook to Paypal. Banks are starting to offer cryptocurrency exposure to their clients. Exchange-traded funds are being deployed, investing on Bitcoin exclusively.
Company MicroStrategy (NASDAQ: MSTR) founded by Michael J. Saylor is also betting big on the coin. They disclosed in a regulatory filing last week that they held 91,579 bitcoins. They were acquired at an aggregate purchase price of $2.226 billion and an average purchase price of about $24,311 per Bitcoin.
As with adoption, comes regulation. And the crypto industry is no escaping this, it’s getting heavily regulated. With Bitcoin becoming more scarce, and as the availability of the coin diminishes on exchanges, common folks won’t be able to buy the real thing, but only derivatives of Bitcoin.
Instead of the social revolution, Satoshi envisioned, it will be an asset for the rich. Heavily regulated. But you will make money if that’s all you care about.
All those investments made by world-renowned banks and companies give even more credibility to Bitcoin as a store of value, but also the whole crypto ecosystem. I don’t think we can have another 2000% price movement before this bull run ends, which would put the price of Bitcoin at around $400K. As Bitcoin sets foot in the real world of finance, the amplitude of these bull runs will diminish.
I am not saying it cannot go to $400K in this bull run, but Bitcoin won’t x20 at every halving. That would be too easy and everyone would be a Bitcoin billionaire. It will stabilize until the adoption cycle has ended. The floor of the next bear market cannot be determined until we have actually seen the top of this bull market. But I think the floor will be much higher than what most people think. I don’t think we will see a $40K Bitcoin again.
Happy trading or HODLing!