4 min read.Updated: 14 Jul 2021, 01:12 PM ISTSiddharth Menon
With DeFi, the crypto ecosystem grows everyday with new, innovative products and services. According to DeFi Pulse, total value locked in DeFi is now $50.75 billion. This suggests a bull market for not only Bitcoin, but other crypto assets too
The price of Bitcoin falling below $30,000 has caused a significant portion of the crypto community to wonder if the Bitcoin bull run will sustain. What caused this sudden price volatility? Elon Musk’s announcement that Tesla would not accept Bitcoin for Tesla purchases anymore was merely a trigger in a market that was screaming for a correction. China’s ban on crypto (yes, again) and crypto mining, and also negative comments from the US Treasury Secretary Janet Yellen, and other influential business leaders such as Warren Buffett and Bill Gates contributed to the fall.
However in this piece, I’ll take a comprehensive look at all the reasons why crypto enthusiasts like me are not considering the crypto bull run over just yet.
Why the Bitcoin Bull Run Is Not Over: Technical Reasons
Despite the volatility, Bitcoin has maintained its long-held support at $20,000. This level was the 2017-18 Bitcoin bullrun’s all-time high. The behaviour of long-term investors during this recent market slump also expresses their positive attitude toward Bitcoin; the balance in addresses which have been accumulating the crypto has only increased as the price dips, and even the number of addresses that are now holding Bitcoin is also dramatically going up. These addresses are using the lower price points for future profits. This huge buying pressure seen at around 30K will very likely strengthen at lower levels. In fact, a retest of 20K followed by a bounce will be a validation for the biggest Bitcoin bull run we’ve seen so far.
The US stock market is exhibiting a megaphone pattern, forming in the chart of the S&P 500. The megaphone pattern, to the uninitiated, is a pattern that consists of at least two higher highs and two lower lows, and it generally forms when the market is highly volatile in nature and traders are not sure of the market direction. If we see the stocks slightly dip and then correct, a bull cycle for all assets may result as capital flows change direction.
Bitcoin entered Q1 of 2021 at 29k. In the first quarter, its price rose about 80%, making it the best-performing Q1 for Bitcoin in eight years. While Q2 has been bearish so far, it has also been stable, and nothing actually suggests that the bull run is over.
According to the Bitcoin lengthening cycle theory theory, in the crypto market, a typical cycle goes something like this: (Accumulation → Bull Market → Blow-off top → Major Correction → Bear Market). A lengthening cycle suggests that after each price top and the subsequent correction, the time period until the next bull market lengthens every time. It’s been noted that Bitcoin sees a bull run right after each halving. However, as the lengthening theory suggests, after the Bitcoin halving of 2020, the accumulation period still remained in action for several months. The bull market naturally comes right after that, and not a bearish market.
Why the Bitcoin Bull Run Is Not Over - Fundamental Reasons
Comparing the 2017-18 bullrun again, in 2017 too China waged war against crypto by shutting down local crypto exchanges, similar to this year’s ban on mining and crypto transactions. However, as we can see today, what happened after all that fear, uncertainty and doubt of 2017 is that Bitcoin only grew stronger. Therefore, this time too there’s no solid reason for the Bitcoin bull run to be over.
Bitcoin is, at the moment, more powerful than ever, with all the institutional support it has received. Platforms such as Tesla, PayPal, Square, Grayscale, and MicroStrategy have accepted Bitcoin. Banks like Morgan Stanley are offering Bitcoin trading. Canada has launched the world’s first Bitcoin-focused exchange-trade fund (ETF) on the TSX. El Salvador would now be adopting Bitcoin as legal tender, and politicians from other countries like Panama, Brazil, Mexico, and Argentina have already come out in support of Bitcoin as legal tender.
Over 30% of all US dollars has been printed within 2020. People are already hedging against coming inflation, which further strengthens crypto like Bitcoin.
With the presence of DeFi, the crypto ecosystem grows everyday with new, innovative products and services. According to DeFi Pulse, the total value locked in DeFi is now $50.75 billion. This suggests a bull market for not only Bitcoin, but all other crypto assets too.
This, in my opinion, is barely the surface of a mammoth list of factors why I think we are far from a long term bear market. With long-time investors keeping their faith in the asset and the sheer rate of institutional backing Bitcoin is receiving, the bear market argument does seem quite unfounded at present. However, as always, even when you’re optimistic about market conditions, you should also always be prepared to fend off the worst-case scenario when you’re dealing in the crypto markets.
(Siddharth Menon is chief operating officer at WazirX.)
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