At 15:00 UTC on Wednesday, the much-anticipated Zhejiang testnet for staking withdrawal went live on Ethereum’s Beacon chain. Zhejiang will enable the testing of the Ethereum Improvement Proposal (EIP) 4895 which allows for staking withdrawals. This is in preparation for the network’s next major update, the Shanghai hard fork slated to launch sometime in March. Users Can Make Simulated Withdrawals with Zhejiang In a tweet yesterday, DevOps engineer at Ethereum foundation Barnabas Busa gave details about the Zhejiang testnet slated…
When Will the Next Bull Run Drive Crypto Up
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.
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.
An Overview of Different Cryptocurrency Scams
Cryptocurrency scams are fraudulent schemes that are becoming increasingly common as the popularity of cryptocurrencies continues to grow. They can take many forms and are often designed to appear legitimate investment opportunities or exchanges. Unfortunately, these scams can cause significant financial losses for individuals and harm the reputation of the cryptocurrency industry as a whole. It is crucial for anyone considering investing in cryptocurrencies to be aware of the various types of scams and to take steps to protect themselves.…
What Are Crypto Data Aggregators?
Crypto data aggregators gather data from multiple sources to provide comprehensive and real-time information about the cryptocurrency market. They pull data from various exchanges, trading platforms, and other sources to centralize the information and present it in a user-friendly format. The data includes cryptocurrency prices, trading volume, market capitalization, news, and other relevant information. Crypto data aggregators use algorithms to clean, process, and normalize the data to ensure accuracy and consistency across multiple sources. The information is then presented in…
What Is CoinGecko?
CoinGecko is a cryptocurrency data aggregator and tracking platform. It provides information and insights on the cryptocurrency market, including price, volume, trading activity, developer activity, and community growth. How CoinGecko Works Data Aggregation: CoinGecko collects crypto data from various cryptocurrency exchanges, wallets, and blockchains to create a comprehensive database of cryptocurrency information. Calculation of Metrics: CoinGecko calculates several metrics, such as market capitalization, trading volume, liquidity, and community growth, to provide a comprehensive overview of the cryptocurrency market. Display of…
What Is CoinMarketCap (CMC)?
CoinMarketCap (CMC) is a website that provides information about the cryptocurrency market and tracks the capitalization of various cryptocurrencies. It was founded in 2013 and has become one of the most popular cryptocurrency data providers. CMC aggregates information about the prices, volume, and market capitalization of cryptocurrencies from various exchanges and calculates the average value. Furthermore, the website displays this information in real-time, giving users a comprehensive overview of the cryptocurrency market. CMC tracks over 22,000 cryptocurrencies, including Bitcoin, Ethereum,…
What Are Crypto Pyramid Schemes?
A crypto pyramid scheme is a fraudulent investment scheme where returns are paid to existing investors from funds contributed by new investors. It's called a "pyramid" because it typically has many new entrants at the bottom, with each layer representing fewer investors. Example: John starts a pyramid scheme and invites five friends to invest 1 Bitcoin each. John promises to return 2 Bitcoins to each participant in a month. John needs 10 Bitcoins to fulfill his promise, so he invites…
What Is a SAFE (Simple Agreements for Future Equity) in Crypto?
Simple Agreements for Future Equity (SAFE) is a financing instrument used in the crypto and start-up communities to secure early-stage funding without giving up ownership or control. A SAFE is a contract between a startup and an investor that promises the investor a certain amount of equity in the company in the future in exchange for a direct cash investment. The terms of the SAFE, including the valuation of the company and the equity to be received, are agreed upon…
What Are Crypto Institutional Investors?
Crypto institutional investors are large financial institutions that invest in cryptocurrencies, such as Bitcoin and Ethereum. They play a crucial role in providing stability and growth to the crypto market, helping to bring more mainstream recognition to cryptocurrencies as a legitimate asset class. Crypto institutional investors typically comprise large investment banks, hedge funds, pension funds, and endowments. They bring significant resources and investment expertise to the crypto market, providing the liquidity and capital required for the market to grow and…
What Is Automated Crypto Trading?
Automated Crypto Trading is a type of trading that uses software programs to automate the buying and selling of cryptocurrencies on the market. It uses algorithms to analyze market data and execute trades based on predefined strategies. The software can be programmed to scan the market and make trades based on specific conditions, such as price changes or trends. It also allows for backtesting and optimization of trading strategies. In addition, the trades are executed automatically, reducing the need for…
What is Genesis Mining in Metaverse?
Genesis mining in the metaverse refers to the initial creation and distribution of virtual assets within a virtual world or metaverse, such as virtual real estate or virtual currency. The creators or developers of the metaverse often control this process. It may involve using blockchain technology to ensure the security and integrity of virtual assets. The term "genesis mining" describes the initial creation and distribution of these assets, similar to mining for precious metals or other resources in the physical…