Top 5 Reasons Why the Bull Market May Start Tomorrow
15 October 2023
The cryptocurrency market has been through its fair share of ups and downs, with recent times being characterized by a bear market. However, several indicators are suggesting that the tide may be turning. In this article, we'll explore five compelling reasons why the bear market might be coming to an end sooner than expected.
1. New Four-Year Bull-Bear Cycle: A Historical Guide
Explanation: The four-year cycle in cryptocurrency refers to a pattern where the market experiences significant movements roughly every four years. This is closely tied to Bitcoin's halving events, which occur approximately every four years.
This year marks the initiation of a new four-year cycle. Historically, this has been an optimistic sign for the crypto market. Based on past trends, we can anticipate a bull market in the next two to three years.
Four-year Cycles and the Bitcoin Price
Source: VanEck Research, Data as of 30/09/2023. Historic performance is no guarantee for future results.
2. Impending Bitcoin Halving Event
Explanation: Bitcoin halving is a process that occurs approximately every four years, during which the rewards for mining new blocks are halved. This mechanism is programmed into Bitcoin's code to control its inflation.
Traditionally, bull markets have started well before the actual halving event. This anticipation is driven by the belief that the reduced rewards for mining will create scarcity, potentially driving up the price.
Bitcoin Halving Events projected on the Bitcoin Price Performance
Source: VanEck Research, Data as of 30/09/2023. Historic performance is no guarantee for future results.
3. Short Term vs. Long Term Holders Ratio
Explanation: This metric refers to the proportion of cryptocurrency holders who have recently acquired their assets (short term holders) compared to those who have held their assets for an extended period (long term holders).
Currently, the market has seen a significant exodus of short term holders, leaving ample room for potential growth. Historically, the bottom of a bear market is associated with a maximum level of long term holders. As the market shifts into a bull phase, the ratio tilts in favor of short term holders. This phenomenon comes in phases, starting with long-term holder accumulation which transitions in long-term holder distribution. While long term-holders are distributing coins, short-term holders are accumulating faster than long term-holders are distributing giving rise to significant price appreciation (albeit for a shorter amount of time as the bull market may soon come to an end). Short-term holder accumulation is followed short term holder distribution faster than long-term holders can accumulate leading to significant price depreciation.
Short Term versus Long Term Holders Supply Ratio
Source: VanEck Research, data as of 30/09/2023. Historic performance is not an indicator of future results.
4. Recovery of Transactions Usage
After a crash, it's crucial to monitor the usage of a blockchain network, measured by the number of transactions conducted on the chain. Recent data indicates that the chain's activity has largely rebounded, approaching pre-crash levels. This suggests renewed interest and activity in the cryptocurrency space.
5. Changing Dynamics: Price Appreciation and Trading Volume
Bull markets are characterized by rapid price appreciation and a surge in trading volume. Interestingly, we are noticing a shift in this trend. While price appreciation is a key factor, the trading volume, which reflects the level of market participation, has seen notable changes. This evolving dynamic may signal the transition from a bear to a bull market.
6. Bonus Reason: Useful DApps
Explanation: DApps are decentralized applications based on smart contracts that use blockchain as their main infrastructure. DApps often have their own utility token but also leverage the native network token (such as ETH) to facilitate transactions or any other on-chain activity driven by the DApp.
In the past year, increasingly many DApps have found product market fit and a long term sustainable business model that actually makes sense to decentralize. The utility token creates incentives and revenue streams for token holders and users while the DApp provides a service or product that is unique and cannot be done with traditional Web2 technology.
Type of Applications and Industries and Industry Size Targeted by DApps
Source: VanEck Research, Data as of 30/09/2023. This should not be understood as financial advice for any particular asset type or industry.
For each of the beforementioned reasons, historical performance or events are not an indicator for future results. Investing in crypto comes with significant risks such as the risk of extreme volatility and risk of total loss.
Conclusion
While cryptocurrency markets are known for their volatility, there are several compelling indicators suggesting that the bear market may be on its last legs. From historical cycles to fundamental metrics like short term vs. long term holder ratios, the signs are encouraging. As always, it's important to approach investment decisions with caution and conduct thorough research.
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