This year has seen a gradual but significant improvement for cryptocurrency prices from the chilly crypto winter of 2022. Factors such as cooling inflation and a more relaxed macroeconomic situation have given crypto the space to turn upward and settle in the green. While the road to recovery (to 2021 prices) might be long, there is definite hope on the horizon.
Before we dive in, let’s first review the previous crypto bull runs that have made history. When it comes to bull runs, there is a pattern where the price rises and continues to follow an upward trend after a Bitcoin halving. Typically, bull runs tend to occur twelve to eighteen months after the halvings.
This article tends to focus heavily on Bitcoin as the cryptocurrency holds a lot of weight in the industry. Bitcoin market trends tend to dictate the way forward for many other altcoins, while this isn’t black and white, it tends to be the norm. When Bitcoin enters a bull run, so too do other cryptocurrencies, and when the Bitcoin price is down, the same applies.
What is a Bitcoin halving?
Satoshi Nakamoto, the creator of Bitcoin, strongly believed that scarcity creates value. When designing Bitcoin, it was decided that there could only ever be 21 million coins, and while these can be broken down into small decimal places, there is no changing that maximum supply.
In order to leverage the scarcity and ensure an even distribution of new coins entering circulation, Nakamoto designed a halving mechanism. The mechanism ensures that the currency remains deflationary, and plays little havoc on the market.
To understand how a halving works, one must first understand how Bitcoins are mined. Through a decentralized network, new transactions are entered into a mempool while they await confirmation. Miners will then compete to verify them by completing a complex cryptographical puzzle. The first miner to successfully complete the puzzle is awarded the job of verifying the transactions (and earning the reward).
Once all the transactions have been verified they are executed and the data from each transaction is added to a block, which is added to the blockchain in chronological order. The miner then receives a transaction fee from each transaction as well as a miner's reward for adding a new block to the blockchain.
Every 210,000 blocks, roughly four years, this reward is halved in what is known as the halving mechanism. In 2009, the miner's reward was 50 BTC, today it is worth 6.25 BTC. While the price tends to increase substantially, the reward is automatically halved at these intervals. Written into its code, the halvings are automated activities that cannot be altered.
Reviewing Previous Bull Runs
Bitcoin's first mini bull run
The first recorded "bull run" took place in April 2011 when the price of Bitcoin rose 3,000% over the space of three months. After reaching $1 in April 2011, the coin went on to reach $32 in June. This price increase was short-lived however as the price returned to $2 in November.
The next year the cryptocurrency underwent its first halving in November, ending the year between the $13 and $14 price mark.
2012 Halving / 2013 Bull Run
In the first few months after the halving, the price rose from $13 to $30. By April, one Bitcoin was trading for $100, its then all-time high, spurring interest from curious outsiders. By November, twelve months after the initial halving, Bitcoin broke the $1,000 barrier. This, unfortunately, was short-lived as the price dropped to around $530 a month later.
2016 Halving / 2017 Bull Run
The next halving took place in July 2016, when the price was trading at around $600. After years of the Bitcoin price bouncing between $100 and $900, it finally hit the $1,000 mark again in January 2017, six months after the halving. By mid-May, the price had doubled to $2,000, and by December of the same year, the price sky-rocketed to just under $20,000.
Sparking a Bitcoin frenzy, the digital asset became a hot topic in mainstream media and many investors hopped on the bandwagon. This also sparked widespread development within the industry, with many altcoins being launched and what has become known as the "ICO craze". Due to the quick ascent of this nascent technology, adoption and regulation became prominent topics of discussion in financial and regulatory circles.
By December 2018, just a year later, the price had shrunk to $3,236, while in December 2019, Bitcoin was trading at $7,200.
2020 Halving / 2021 Bull Run
In 2020 the world was struck by the Covid-19 pandemic, causing unprecedented damage to economies around the world. While Bitcoin and other digital currencies took a knock, the industry proved to be much more resilient than most other markets.
Dropping almost 50% to lows of $4,900 in March 2020, the price gradually recovered to $9,000 in May when the next halving took place. The upward price trend continued its climb, reaching $29,374 in December, another all-time high.
In the early months of 2021, the Bitcoin price doubled in value reaching $64,000 in April. By July it was trading around $30,000 again before skyrocketing to $68,000 in November. By January 2022 the price had corrected to $35,000 before the market was faced with several unfavorable factors.
Markets around the world took another hit when Russia declared war on Ukraine, sending the price of everyday items including fuel soaring. Governments increased interest rates to the highest they've been in decades, and global supply chain issues caused by the pandemic continued to cause upset.
With the world in financial uncertainty, not to mention the demise of several cryptocurrency networks, many investors pulled their money from the crypto markets as well as tech-based stock markets. This saw the price of Bitcoin dip below the $20,000 mark for the first time in two years.
2022 has been declared a crypto winter, however, market analysts remain determinedly optimistic that prices will return to $100,000. Not a matter of “if”, but a matter of “when”.
Are We Headed Toward The Next Crypto Bull Run?
While prices have seen a vast improvement since the lows of 2022, 2023 hasn’t exactly panned out to be the bull run many traders were hoping for. Nonetheless, the year-to-date Bitcoin price has seen a 29% increase while the Bitcoin Fear and Greed meter observed a hopeful incline from a state of “extreme fear” to a “neutral to moderate” greed rating.
This measure of market sentiment is a vast improvement from 2022 and indicates that the cryptocurrency has moved into the accumulation phase. According to the Wyckoff market cycles, this is the prerequisite to the mark-up phase which sees significant price gains. While Bitcoin's price is displaying strong long-term bullish signals, the short-term forecasts are still uncertain.
What we do know is that there's an expectation of increased market activity in the near future, whether it occurs this year or the next. Then, with the upcoming halving in 2024, there's potential for significant changes ahead.
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