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Ask CryptoVantage: What Will Drive the Next Crypto Bull Run?
After 2022’s thrashing, crypto investors are ready for the next bull run. And the tide seems to be on their side.
The last few months saw major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) reach new 12-month highs, with gains of 80% and 52%, respectively.
These positive developments were fueled by favorable news, such as BlackRock, the world’s largest money manager, entering the race for a spot Bitcoin exchange-traded fund (ETF)
The move galvanized other asset managers to submit appeals for the highly sought-after ETF, which Bitcoin proponents reckon will be massive for Bitcoin’s mainstream recognition.
Crypto investors are hoping that we only go up from here. But what are the signals? What are the top indicators for the next bull run?
We identified growing institutional investors, the potential approval of a spot Bitcoin ETF, and next year’s halving as the top three. Let’s dig in.
Indicator #1: Institutional Interest
If the history of the crypto industry is to go by, a favorable disposition towards it by institutions often bodes well for its performance.
After the fallout from last year, the overall sentiment in the space was that crypto had lost its luster — at least when it comes to institutional investors.
But the appetite for crypto among institutional investors is still strong. That’s evidenced by a recent survey by Laser Digital, the digital assets arm of the Japanese financial holding venture Nomura.
Laser Digital surveyed over 300 institutions across 21 countries in Europe, the Middle East, and other regions in wealth management, insurance, pension, hedge, and investment funds with $4.9 trillion in assets under management (AUM) between them.
The survey revealed 96% of these institutions view crypto as an “investment diversification opportunity,” alongside traditional options like fixed income, cash, equities, and commodities.
An interesting finding was their readiness to allocate as much as 5% of their cash into cryptocurrencies. They also revealed they are “keen to invest” in crypto.
Such institutional interest is poised to intensify after BlackRock’s filing for a spot Bitcoin ETF in June. Unlike other asset managers whose applications the SEC has tossed out, commentators think that this time the commission will acquiesce — partly due to BlackRock’s economic and political muscle.
As more institutions leap into the action, it will contribute to the next bull run.
Indicator #2: Spot Bitcoin ETF
The SEC has spent a decade rejecting the idea of a spot Bitcoin ETF but has given the green light to other Bitcoin ETFs that it doesn’t consider a tinderbox: a leveraged ETF and a Bitcoin futures ETF.
A spot Bitcoin ETF would involve the issuing company actually having Bitcoin in its possession as a reserve asset. But due to Bitcoin’s notorious volatility, the commission contends that such an ETF would be susceptible to market manipulation and fraud.
But thanks to BlackRock entering the race, the tide might be changing. The asset manager might just qualify for what the SEC describes as a “comprehensive surveillance-sharing agreement,” with “a regulated market of significant size related to spot Bitcoin.”
Surveillance-sharing agreements exchange market data, clearing, and customer info, staving off fraud. NASDAQ, the stock exchange on which BlackRock’s ETF would be traded, is planning to collaborate with Coinbase to fulfill the requirement.
Other fund managers, including Fidelity, Grayscale, Invesco, Valkyrie and Wisdom Tree, all of whose spot ETFs were rejected, have also submitted fresh applications with a surveillance-sharing agreement ticked off this time.
If a spot ETF were to be approved, it would be major. It would show regulators, governments and investors worldwide that Bitcoin is a legitimate asset that can go head-to-head with other traditional assets, including stocks, bonds, or currencies.
That could very well trigger the next bull run for the entire market.
Indicator #3: The Bitcoin Halving in 2024
If all else fails, the crypto community is banking on Bitcoin’s – roughly every four years – halving event to trigger the next bull run.
Bitcoin halving, or “halvening”, is an event in which the reward for miners is cut in half after every 210,000 blocks, with the amount of BTC entering into circulation also cut by half.
The idea behind Bitcoin’s halving is to control the inflation rate and gradually reduce the new supply of Bitcoin. That makes it more scarce over time. This decreasing supply rate also contributes to the idea that BTC is a deflationary asset (and hence the moniker “digital gold.”)
The halvening is easily the most usually hotly anticipated event in crypto — generating a ton of public interest and media attention. This heightened awareness can fuel speculative buying and increased demand. The result is a potential bull run.
Past halvings have been followed by massive price rallies. In 2012, for instance, Bitcoin surged by approx. 8,000% in the year after the halving. It saw another climb of nearly 1,000% off the back of 2016’s halving event.
The most recent halving in May 2020 sparked a bull run that peaked, with Bitcoin reaching an apex price north of $68,000 in November 2021. Now, Bloomberg and Matrixport predict a jump of 81% following 2024’s halving.
What’s a Bull Run?
In crypto, a “bull run” describes a sustained increase in the prices of cryptocurrencies, which results in prices surging. During a bull run, investor optimism is high, most investors are buying, and demand outweighs supply.
The word ‘bull’ derives from the image of a bull on the offensive — with its horns in the air — symbolizing strength.
The phrase itself is borrowed from traditional financial markets, especially stocks. A bull run is the opposite of a bear market: prices are down, investor sentiment is in hell, and selling activity outstrips buying activity.
Final Words: Pick a Narrative
The crypto market is slowly picking up from last year’s devastating rout. July saw the highest price levels in a year — triggering optimism that the following months will prove even more decisive.
Institutional interest, a spot Bitcoin ETF and next year’s halvening will play a huge role in the next bull run.
