When Will the Next Bull Run Drive Crypto Up

Overall, 2023 could end positively, and the crypto markets may have a chance for a new bull run. However, the so-called "black swans," or unexpected events, could surprise the markets and change the course of the crypto industry.

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After several negative quarters, the market wonders when the next crypto bull run will be. Crypto prices fell due to high inflation caused by geopolitical tensions, global monetary policy, and cyclical factors in late 2022.

But now investors want to know what could trigger a rebound and when the next crypto rally may occur.

The Reasons Why Crypto Entered a Bear Market in Late 2021

Before determining what could catalyze the next crypto rally, we’ll examine why prices fell dramatically in 2022.

The subsections below provide an overview of the main factors behind this bear market and how they interacted.

The Role of Inflation and Deflation in the Crypto Market

The troubles in the sector began with high inflation In late 2021. After months spent labeling inflation as “temporary,” the Federal Reserve changed its mind and made moves to combat it.

This caused the US Dollar to rise in value, which had an immediate and negative impact on crypto prices.

Today, many crypto whales are significant hedge funds, and this is especially true concerning substantial coins. 

What do hedge funds do when market risk increases? First, they reduce the risk by selling, which is precisely what happened in late 2021.

Remember, Bitcoin is a risky asset. Therefore, it undergoes more selling pressure when the market worsens than other assets.

Can Central Banks Influence Crypto Prices?

Many of those claiming crypto was a completely independent entity turned out to be wrong in 2022. When most central banks began setting higher interest rates to fight inflation, crypto did not react well.

Why is this happening? There are at least three main reasons. First, inflation makes the US Dollar more attractive to investors, which reduces demand for Bitcoin and other altcoins.

The second reason is that higher interest rates reduce liquidity in the market, meaning fewer buyers in the cryptocurrency space.

Finally, some central banks have become increasingly vocal about their stance on cryptocurrencies, further decreasing investor confidence.

The Impact of Geopolitical Tensions on Crypto Prices

As if inflation was not enough, Russian troops invaded Ukraine in February 2022. This signaled the start of a prolonged geopolitical conflict that had an immediate and dramatic effect on crypto prices.

The war caused investors to flee from risk assets, including cryptocurrencies. This was due to traders looking for more secure places to store their wealth.

This resulted in a sharp decline in cryptocurrency market capitalization. The same happened on the stock market, with global indexes falling, expecting an imminent recession.

Russia received multiple sanctions from the Western economies. This choice put pressure on oil and natural gas prices, two of Russia’s main exports.

As a result, the recession risk increased, and investors further reduced their exposure to cryptocurrencies.

Lack of Confidence in the Sector’s Solidity

The recent FTX scandal gave another blow to the sector’s reputation and made investors question their trust in the industry.

Let us simplify the ongoing matter:

  • FTT lost billions of its users’ funds in shady investments
  • Crypto exchanges should not be able to use their clients’ money. This discovery put pressure on many FTT competitors.
  • The people behind the scandal risk a 110-year sentence.
  • The exchange may even have favored money laundering.
  • FTT chose to cease its activities and declared bankruptcy.

This messy situation caused even more fear in the markets, increasing the selling pressure on crypto prices.

The lack of trust in the industry was already present before this scandal. Unfortunately, recent events have only worsened this situation.

The Potential for a Cyclical Rebound

Furthermore, let us not forget what happened to crypto in the past few years. In late 2020, BTC prices exploded from $15,000 to an all-time high above $69,000.

Though painful, the current bear market is probably the price to pay for such an impressive rally.

In the long run, crypto prices tend to follow cycles. This could signal the start of another bull market in late 2023.

The underlying fundamentals remain strong, and it may be a matter of time before investors flock back into the sector.

What Could Trigger the Next Crypto Run?

The crypto market is inherently volatile and can respond to many external factors. Political tensions, regulatory developments, technological breakthroughs, and macroeconomic events are only some of the main drivers for crypto prices.

A significant development that could help trigger the next bull run would be the cooling off of geopolitical tensions.

If this were to happen, investors would start pouring money back into risk assets, including cryptocurrencies.

Moreover, further regulatory clarity could help alleviate some of the doubts surrounding the industry. These changes may give people more confidence in their crypto investments.

Finally, technological breakthroughs such as scalability or new protocols could also positively affect prices.

Will Regulations Have an Impact on Future Cryptocurrency Performance?

The FTX story pushed many to request stricter regulations in the sector. So far, Western regulators have been relatively permissive. Some countries, such as Japan, have even become global leaders in crypto-friendly rules.

More countries will likely jump on board and adopt a regulated framework for cryptocurrencies in the future.

This could make the sector more attractive to institutional investors and create a fairer playing field for retail traders.

More regulations could also help improve transparency, which is one of the main problems in the crypto-verse.

The Potential Advantages of Institutional Investment in Crypto

Once inflation moves closer to the 2% level, or if geopolitical pressures ease, more institutional investors could come in.

The increased flow of capital from traditional sources such as hedge funds would be very welcome for the crypto markets.

On the one hand, it could help fuel a new rally with higher highs than ever. On the other, institutional investment brings more money but also more liquidity and, in turn, a better price discovery.

This could result in a healthier environment for crypto prices and give investors more assurance to trust the sector again.

What Factors Could Hinder Future Crypto Rallies?

The crypto industry is still relatively young, and many risks are associated with investing in virtual currencies.

One of the main issues is that cryptocurrencies remain highly speculative assets. As a result, many external factors could influence their prices. Moreover, regulatory uncertainty remains a significant issue for the sector.

Some countries could decide to crack down on digital currencies, implementing more oppressive laws.

Finally, another risk is the lack of reliable custodial solutions and secure storage options. This limits the entry of institutional investors and could hinder any potential crypto rally in the future.

What Lessons Can We Learn from the Last Crypto Crash?

The crypto crash of 2022 is a reminder that the sector can be unpredictable, and investors should always exercise caution.

Diversifying your portfolio is essential; invest only what you can afford to lose.

Furthermore, conducting research before investing in any cryptocurrency or project is essential. This will help you understand a particular investment’s potential risks and rewards.

Cryptocurrencies are not yet a haven against inflation. Moreover, investors should know the growing geopolitical problems affecting crypto price movements.

Finally, keeping an eye on regulatory developments and staying alert for news that could potentially move the markets is essential. The crypto industry is rapidly changing, so staying up to date with the latest developments is crucial.

Bottom Line – Will 2023 See a New Crypto Boom?

The first half of 2023 will likely see high inflation. However, the second semester may show positive signs of recovery worldwide.

Geopolitical tensions are impossible to predict, but many underline the effects of economic sanctions on the Russian economy.

This could ease some market volatility in the second half of 2023.

In terms of regulations, more countries are likely to create legal frameworks for cryptocurrencies, which could attract more institutional investors. Still, regulatory uncertainty remains one of the main challenges the crypto markets will face in 2023.

Overall, 2023 could end positively, and the crypto markets may have a chance for a new bull run. However, the so-called “black swans,” or unexpected events, could surprise the markets and change the course of the crypto industry.

In any case, investors should remain vigilant and closely monitor the evolution of macroeconomic factors and regulatory developments.

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The key to crypto investing success is staying informed and diversifying your portfolio. That way, you can minimize the risk of losses and maximize your profits.

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