Three Factors That Could Drive the Next Crypto Bull Run

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Every event requires a catalyst – a spark that will precipitate the explosion that comes next. It’s been that way since the Big Bang, and crypto is no different.

When Bitcoin enters full bull season again, the breakout will occur overnight, and yet the seeds that triggered it will have been planted long ago.

A plethora of macro and micro forces will dictate the timing, ferocity and duration of the next bull run – that giddy phase when a market enters ‘up only’ mode and assets good and bad post-double-digit gains just for fun.

We don’t know the day or hour when crypto will break bullish. But we know that it’s coming, as sure as night follows day.

And when it does occur, odds are that the following factors will play a pivotal part in crypto’s stellar story.

The ETF

The first driver of Bitcoin’s ascent – and where BTC leads the rest of the market inevitably follows – is the approval of an ETF (exchange-traded fund).

Institutions have been trying to get one over the line for years, but the SEC has always said no, citing the potential for market manipulation.

But now BlackRock’s decided it wants one, and what the investment giant wants, it invariably gets.

In recent months, CEO Larry Fink has begun saying nice things about Bitcoin while its ETF application grinds its way through the torturous approval process.

Meanwhile, other players have gotten in on the act, filing and refiling their own initiatives.

The general consensus is that an ETF will be approved sooner rather than later, and that when it occurs, it will be a major driver of greater price discovery for BTC and other crypto assets.

The approval of a Bitcoin ETF means that pension funds can get direct exposure to crypto for the first time.

It also validates crypto as an asset class, opening the door to additional ETFs, with Ethereum (ETH) the likeliest coin to be green-lighted next.

As for when the mythical Bitcoin ETF is likely to occur, odds are one will be approved within H2 or by Q1 of 2024 at the very latest.

The halvening

If crypto still hasn’t kicked into high gear by Q1 of next year, don’t despair – the next potential driver will be imminent.

Next May, Bitcoin will undergo its four-yearly halving schedule – or ‘halvening‘ as it’s commonly known. This is when the block reward issued to miners reduces by half.

At present, 6.25 BTC are issued approximately every 10 minutes. From May, this reward will diminish to 3.13 BTC.

In real terms, the reduction in new supply won’t have a major effect on the market – half a million dollars of BTC being sold every hour is easily absorbed.

The real significance of the halvening lies in the psychological effect it exerts.

For one thing, it’s a calendar event that can be pre-traded and post-traded – empirically BTC tends to rise a few months after the halvening.

For another thing, the reduced issuance rate reinforces the scarcity meme. It’s a tangible reminder, in other words, that there will only ever be 21 million Bitcoins and demand for the remaining supply is going to intensify.

Whatever reasons one may postulate for the halvening’s effect on price, there’s no denying there’s a correlation between the two. The only matter to be decided is when it kicks in – pre- or post-halvening.

The regulating

Crypto regulation is often described in a negative context, as something to dampen the market rather than ignite it.

This is understandable since much of the attempts at regulating the industry, particularly emanating from the US, have been overzealous in their reach and risk stifling innovation.

The SEC under its current chair Gary Gensler has come in for particular criticism for its desire to declare major crypto assets as securities while arguably doing little to protect investors, which is the agency’s remit.

Be that as it may, regulation is an attempt at providing clarity and delivering investor protection, and when measured, it can achieve these aims.

To be fair to regulators, crypto is an industry that’s constantly shape-shifting, and no sooner have policymakers wrapped their heads around one concept – algorithmic stablecoins or DeFi – than its participants have moved on to the next use case.

Crypto is a big target, but it’s also a moving one that’s proven hard to nail.

Nevertheless, there are signs emerging that better regulation is on the way – both in the US and Europe – that will support greater participation from consumers and institutions alike.

Stablecoins and digital payments are receiving recognition, while the UK has declared its intention to provide greater consumer protection.

In April, the EU followed suit, implementing a harmonious framework for digital asset regulation.

Creating consumer FOMO is the last thing on regulators’ minds – they have no desire to spark a digital gold rush.

Regardless, there will reach a point at which the most egregious proposals have either been turned into law or rejected in favor of more benign alternatives.

When that happens, confidence will return to the markets, clearing the way for a move up and potentially a multi-year bull market.

It may be the halvening, it may be the BlackRock ETF or it could be more favorable regulations that kickstart the next bull run.

Whatever the spark, the resulting conflagration is inevitable. Like a dry forest in a heatwave, it’s merely a case of when.

Gracy Chen is the managing director of the crypto derivatives exchange Bitget, where she oversees market expansion, business strategy and corporate development. Before joining Bitget, she held executive positions at the fintech unicorn company Accumulus and Foxconn-backed VR startup XRSPACE.

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