Are we in a Crypto Bull Market?

Are we in a bull market?

I have made a research analysis on the current market situation to clarify 1) Current market conditions 2) BTC cycle and 3) Macroeconomic trends. It is vital to understand where we stand at the moment to identify opportunities/threats and to conclude whether we are in a bull market or not.

Please see below some factors that have noticeable value

Price action:

BTC price, 05/23

After the FTX collapse, BTC managed to recover in Q1, 2023, having had a 2x at around 30,600$. This can be related to 2 events: 1) Institutional adoption/BTC whales 2) Bank crisis. From a fundamental perspective, BTC slowly turns up as a safe asset as BTC reaction to various bank crises was more than positive.

At the same time, BTC seems to be losing liquidity which has one important implication, volatility (https://www.reuters.com/technology/cryptoverse-buoyant-bitcoins-losing-its-liquidity-2023-03-28/). This is correlated to the SEC’s intention to regulate and generally go after cryptocurrency banks (ie, Silvegate). When BTC looses liquidity, price action is more sensible to the ups and downs.

ETH price, 05/23

ETH completed successfully a major upgrade in its system, the Shanghai Upgrade. Investors can now unstake their ETH and claim rewards.

On the other hand, it is worth mentioning ETH/BTC pair, see below

The above depiction clearly indicates a downtrend from October, 2022. Typically, in a bull run Altcoins, including ETH, are expected to outperform BTC.

BTC dominance, 05/23

This is another clear indication that BTC is dominating the crypto market and is continuing the uptrend since the FTX collapse (close to 50%). It is fair to mention that this applies, regardless of prices go up or down.

Regulation:

The largest institutional investors are based in the US, thus regulation is indispensable for the Bull Run to begin. Unfortunately, the regulatory situation has deteriorated significantly in the past months in the US as part of the many Cefi collapse (centralized finance). Based on the Silvergate case, it is fair to argue that the US intends to de-bank the crypto industry as this is the most effective way of controlling funds that comes in and out of the market.

Stablecoins are direct competitors of CBDCs, thus, regulation is expected to be severe. Stablecoins are an integral for the crypto industry and is impossible to know where stablecoin issuers keep their funds (Tether is a great example as well as recent USDC crisis).

Countries that are in favour of applying crypto friendly regulations are 1) UAE 2) Saudi Arabia 3) Hong Kong 4) Singapore 5) France. These countries can play a vital role in driving the next Bull market.

Interest rates:

When the FED raises interest rates, investors tend to draw attention to safer investments such as bonds. With a CPI of 4.9% as 05/23, inflation is gradually reducing; however, the 2% target of the US central bank doesn’t seem to be an easy target as there could be severe implications to the economy (recession risk).

Finally, it is important to monitor the M2 supply as when the FED starts printing again, this will likely pump the crypto market.

Geopolitics:

There is an ongoing movement for many countries to have less exposure to the US dollar. Iran is using crypto for trade (commodities), Russia has agreed to use crypto for cross border payments, China has been reducing its exposure to the US Dollar since 2013, and El Salvador has declared BTC as legal tender. This will gradually change the crypto narrative as a means of paying for goods. At the same time, BRIC union considers releasing a mutual currency to lower the US dollar dependency. Arguably, the US central bank is more transparent against those central banks and while there is a chance for this currency to be unveiled, it will be a currency forced by regulation. Such concept cannot be qualified as a global reserve currency. Finally, it is fair to cite that the US dollar dominance is expected to fall within the next years.

Market cycles:

Crypto tends to follow a 4year cycle, mainly attributed to the BTC halving event. Technically, the Bull Run starts when BTC reaches its lowest price level, however, this is impossible to determine that in real time. The next halving event is expected to take place in April 2024 and from a historical perspective, BTC price does not pump immediately after the halving event.

From an Altcoin perspective, please see below ADA’s price action.

ADA between 2018-2020 and 2022-present, seems to follow a flat price action (bear market and recovery years) with no major price pumps. This means that even after the BTC halving event, there is plenty of time to accumulate Altcoins.

Conclusion

Based on the above, I would argue that we are not in a bull run because BTC still outperforms the Altcoin market and its dominance continues to rise with no signs of reversal. Additionally, there is still recession risk as interest rates were raised some days ago and the 2% inflation target for the FED seems to be a mid-term goal (1-2 years). There is also regulatory risk as US regulators are posing major challenges for start ups. It is fair to cite that Altcoins, including ETH, could be viewed as securities in the US. Finally, from a historical perspective, the halving event (April, 2024) is crucial to the next Bull Run which makes the recovery year (2023), a good year to consider accumulating cryptocurrency.

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