Well, let's get back to reality.
However, considering recent 20% increase, we might not have to wait much longer.
Now, let's explore the SIX factors that are potentially driving the bullish trend
Many of us in the bear market might have forgotten what a growing market looks like. But yesterday's price surge served as a reminder, and it got many people wondering: Is this a reversal or just another correction in a downtrend?
I believe this could be the beginning of a new cycle, and here's why:
First, if 16k wasn't the bottom and the price falls further, this bear market could become the longest in history (over two years; previously, each bear market lasted around a year). However, if the market follows its typical cycles, then 16k was indeed the bottom, and we are currently in a correction phase, which will likely be followed by a surge.
But I don't like making decisions solely based on technical charts.
Let's dig deeper into the fundamental reasons for the optimistic outlook on crypto:
1/➮ Halving:
The BTC halving is scheduled for late April 2024. According to market cycle theory:
✧ Halving reduces BTC supply by decreasing the issuance rate.
✧ This, combined with steady demand, leads to price increases.
✧ Rising prices trigger greed and FOMO, increasing demand.
The theory is supported by the BTC price chart, which shows recurring patterns tied to halving events.
✧ Halving is a critical aspect of market culture. Doubts in halving cycles often become self-fulfilling prophecies: investors sell in anticipation of price declines, which, in turn, bring down prices.
Explaining Bitcoin halving to someone new to the crypto space is a great starting point to understand the intricacies of this digital currency. Let's break it down step by step:
Background Context:
Bitcoin is a decentralized digital currency that operates on a blockchain, a public ledger that records all transactions. Unlike traditional currencies, Bitcoin is not issued by any central authority like a government or a central bank. Instead, it relies on a system of rewards for miners who validate and secure transactions on the network.
Assumptions:
To explain Bitcoin halving, it's important to assume your friend has a basic understanding of how cryptocurrencies work, including the concept of mining. If they don't, you might need to start with those basics.
Step-by-Step Explanation:
1. What is Bitcoin Mining?
Start by explaining that Bitcoin mining is the process through which new Bitcoins are created and transactions are verified. Miners use powerful computers to solve complex mathematical puzzles, and in return for their efforts, they are rewarded with new Bitcoins and transaction fees.
2. The Halving Event:
Bitcoin halving is an event that occurs approximately every four years (or after every 210,000 blocks). During this event, the number of new Bitcoins created as mining rewards is cut in half. The term "halving" refers to this reduction by 50%.
3. Why Does Halving Happen?
Bitcoin halving is hard-coded into the Bitcoin protocol. It happens to control the inflation rate of Bitcoin and to ensure that the total supply of Bitcoin is capped at 21 million. By reducing the rewards for miners over time, the supply of new Bitcoins entering the market slows down, making Bitcoin scarcer.
4. Impact on Supply and Demand:
Explain that when Bitcoin halving occurs, there are fewer new Bitcoins being created. This reduction in the supply can have an impact on the supply and demand dynamics. Historically, after each halving event, Bitcoin's price has tended to increase due to the reduced supply, assuming demand remains constant or increases.
5. Historical Significance:
Mention that Bitcoin has experienced several halving events in its history, and each has been a notable point in the cryptocurrency's development. It's important to note that the halving events have not only reduced supply but also generated interest and speculation in the market.
6. Long-Term Implications:
Finally, highlight that Bitcoin halving events are a fundamental aspect of Bitcoin's monetary policy. As they continue, the rate of new Bitcoin creation will keep decreasing until it eventually reaches the maximum supply of 21 million, making Bitcoin a deflationary asset.
2/➮ Launch of spot ETFs:
✧ Spot ETFs aim to provide institutional investors with an alternative cryptocurrency investment tool, addressing the limitations of futures-based ETFs.
✧ ETF operators will be required to hold enough cryptocurrency to fulfill their commitments.
The impact of this development:
✧ Establishes a stronger connection between traditional finance and cryptocurrencies.
✧ Increases demand for BTC and ETH.
✧ Reduces the risk of price disparities between spot and futures markets.
✧ Adds stability and confidence to the crypto space.
3/➮ Reduction in financing rates:
COVID-19 had an unexpected impact on BTC, altering the cryptocurrency's role as an effective hedge against inflation. The U.S. Federal Reserve's economic stimulus efforts shifted the dynamics, affecting returns on safer investments such as bonds. As regulators tightened monetary policies, traditional assets regained popularity. Now, the Federal Reserve might reintroduce stimulus measures, creating a favorable environment for risk assets like BTC, mirroring the trajectory observed in 2021.
4/➮ Unleashing Growth in the RWA Sector:
✧ RWAs bridge Traditional Finance and the blockchain industry, holding immense potential.
✧ ETFs introduce cryptocurrencies to conventional markets, while RWAs enable regulated commodity and stock exchange instruments on decentralized platforms.
This development has various implications:
✧ Drives blockchain technology adoption.
✧ Creates a new channel for liquidity and capitalization.
✧ Empowers traditional assets in the DeFi realm.
✧ Enhances accessibility to traditional markets.
According to the Boston Consulting Group, the RWA market cap is expected to reach $16 trillion by 2030. A significant portion of this sum will find its way into blockchain ecosystems like ETH through liquidity pools.
5/➮ Gas Fees Reduction:
Despite ETH's position in DeFi, the average transaction fee remains high at $1.5-2, even during bear markets.
Potential solutions include:
✧ Exploring Layer 2 (L2) networks with lower transaction costs.
✧ Implementing EIP-4844 to increase ETH throughput.
✧ Revitalizing L1 alternative blockchains and their ecosystems, such as Solana.
These alternatives could expedite the path to recovery.
6/➮ Macroeconomic Landscape:
Global and regional economic conditions significantly impact the crypto sphere. Issues such as supply chain disruptions and challenges in the global energy system affect the crypto market similarly to regulatory decisions from entities like the Federal Reserve.
For the next bull run, stability and improvements in the global economy are crucial. Such improvements would encourage market participants to take on more risks.
Clearly, this 20% price surge might not indicate the start of a new bull run, but it's unlikely that we'll reach new lows. The prevalent scenario suggests a potential dip to 40-48k and then a downturn, which seems like the most likely outcome. In recent weeks, the bear market has felt more real than ever, with minimal liquidity, no new projects, and dwindling narratives. However, we've persevered, and our moment of triumph is approaching, even though some may attribute it to luck.
