What Will Drive the Next Crypto Bull Run?
Despite the air of despair that has enveloped the crypto space in recent months, there has been nothing so far this cycle that signals a major departure from past trends.
Trailing the altcoin rabble in its wake as always, bitcoin has thus far followed more or less the same ups and downs it has tracked in previous cycles marking the typical changes in psychology that drive bullish and bearish periods. .
In fact, occasional claim it this time is differentis itself to be expected as part of the pattern, and demonstrates that this time is the same.
This is not to say that external factors, monetary or political, are the same as before. You cannot stand in the same river twice. But these external flows carry bitcoin and crypto around known channels, and are perhaps balanced by the known behavioral changes that energize the markets.
Looking ahead from here, we can speculate on where the dynamics will come from to drive the next crypto bull run, which means first reflecting on what drove the previous bull run.
Key drivers last time
The crypto boom in 2020/21 coincided with a period when governments strayed from orthodox pandemic response strategies, with extreme stimulus packages. With cash on hand, the population ordered to stay at home, and a surreal sense that normality had been suspended indefinitely, casual investors were inclined to act imprudently, and the result was money pouring into Bitcoin and the rest of the crypto space, including NFTs and meme coins like Shiba Inu.
Essentially, it was a free-for-all, and valuations bubbled through the roof. Not all of this was just optimistic recklessness. In fact, it made sense to take advantage of what was happening, and if a purported quality of bitcoin is that it can be used to hedge against currency depreciation and inflation, then it worked and rose in price when cash was cheap.
Bitcoin’s subsequent crash is not evidence that it is not working as a hedge, but rather that it is responding quickly but coherently to changes in the broader monetary environment, including both relaxation and tightening.
Speculation surrounding NFTs and, later in 2021, metaverse development were also drivers of interest. Ethereum in particular, positioned to be the foundation upon which web3 and the metaverse will be built, at times seemed to run its own distinct narrative, partially decoupled from Bitcoin’s dominance.
Factors in the next bull run
The extent to which the narrative of institutional adoption helped drive the recent bull market is debatable, but a critical aspect of the chorus that the institutions are coming is that in the longer term it appears to be true.
It is likely that this factor will have a more pronounced influence next time if the movements towards institutional acceptance of bitcoin (and other cryptos) increase in pace and become impossible to ignore.
Then we have the question of utility, but in this case Bitcoin’s product/market fit isn’t unclear: it’s money that can be used to trade and save. This is not rocket science, and Bitcoin’s non-judgmental, inclusive and decentralized proposition looks increasingly inviting in contrast to recent controversies surrounding PayPal.
In case you missed the story, last week PayPal released an updated user agreement, including a clause saying it could fine users up to $2,500 per violation if they used PayPal for activities related to promoting misinformation, which is determined solely by PayPal’s beautiful.
The perversity of this policy condition cannot be overstated: we have a financial service provider that presumes to be an arbiter of factual accuracy, that claims authority to delineate what ideas users can and cannot express, and assumes the power to issue material penalties.
Even putting aside ethical and legal debates, it’s a public relations disaster, and the backlash was cacophonous. PayPal quickly backtracked, saying the clause was included in error, but significant damage to its brand and services had already been done.
This can’t be dismissed as a fringe company leap, with attention snowballing on social media, former PayPal CEO David Marcus weighing in to criticize his former company, and Elon Musk agrees with him.
Marcus, fittingly enough, is currently the CEO of Lightspark, a company focused on Bitcoin tools, and it’s Bitcoin that differs greatly from PayPal’s confusingly misguided overreach. Controversies like this draw attention to the safeguards provided by a truly neutral payment method that is disconnected from central authorities.
Finally, another narrative set to drive crypto participation in the coming years is around web3, which is specifically related to Ethereum. Web3 is where crypto crosses over with mainstream, non-financial sectors such as art, fashion, gaming, web development and AR/VR.
Covering such a diverse range of disciplines, Web3 development has an added sheen of respectability and may have the capacity to draw in new participants who are otherwise uninterested in cryptocurrencies and bring them on board in new ways.
Until now, it has been Bitcoin that has led the way, while the rest of crypto has followed. Perhaps, in the next cycle, Ethereum will pull away to create its own web3-focused momentum, while the case in favor of Bitcoin grows ever stronger individually.
Despite the air of despair that has enveloped the crypto space in recent months, there has been nothing so far this cycle that signals a major departure from past trends.
Trailing the altcoin rabble in its wake as always, bitcoin has thus far followed more or less the same ups and downs it has tracked in previous cycles marking the typical changes in psychology that drive bullish and bearish periods. .
In fact, occasional claim it this time is differentis itself to be expected as part of the pattern, and demonstrates that this time is the same.
This is not to say that external factors, monetary or political, are the same as before. You cannot stand in the same river twice. But these external flows carry bitcoin and crypto around known channels, and are perhaps balanced by the known behavioral changes that energize the markets.
Looking ahead from here, we can speculate on where the dynamics will come from to drive the next crypto bull run, which means first reflecting on what drove the previous bull run.
Key drivers last time
The crypto boom in 2020/21 coincided with a period when governments strayed from orthodox pandemic response strategies, with extreme stimulus packages. With cash on hand, the population ordered to stay at home, and a surreal sense that normality had been suspended indefinitely, casual investors were inclined to act imprudently, and the result was money pouring into Bitcoin and the rest of the crypto space, including NFTs and meme coins like Shiba Inu.
Essentially, it was a free-for-all, and valuations bubbled through the roof. Not all of this was just optimistic recklessness. In fact, it made sense to take advantage of what was happening, and if a purported quality of bitcoin is that it can be used to hedge against currency depreciation and inflation, then it worked and rose in price when cash was cheap.
Bitcoin’s subsequent crash is not evidence that it is not working as a hedge, but rather that it is responding quickly but coherently to changes in the broader monetary environment, including both relaxation and tightening.
Speculation surrounding NFTs and, later in 2021, metaverse development were also drivers of interest. Ethereum in particular, positioned to be the foundation upon which web3 and the metaverse will be built, at times seemed to run its own distinct narrative, partially decoupled from Bitcoin’s dominance.
Factors in the next bull run
The extent to which the narrative of institutional adoption helped drive the recent bull market is debatable, but a critical aspect of the chorus that the institutions are coming is that in the longer term it appears to be true.
It is likely that this factor will have a more pronounced influence next time if the movements towards institutional acceptance of bitcoin (and other cryptos) increase in pace and become impossible to ignore.
Then we have the question of utility, but in this case Bitcoin’s product/market fit isn’t unclear: it’s money that can be used to trade and save. This is not rocket science, and Bitcoin’s non-judgmental, inclusive and decentralized proposition looks increasingly inviting in contrast to recent controversies surrounding PayPal.
In case you missed the story, last week PayPal released an updated user agreement, including a clause saying it could fine users up to $2,500 per violation if they used PayPal for activities related to promoting misinformation, which is determined solely by PayPal’s beautiful.
The perversity of this policy condition cannot be overstated: we have a financial service provider that presumes to be an arbiter of factual accuracy, that claims authority to delineate what ideas users can and cannot express, and assumes the power to issue material penalties.
Even putting aside ethical and legal debates, it’s a public relations disaster, and the backlash was cacophonous. PayPal quickly backtracked, saying the clause was included in error, but significant damage to its brand and services had already been done.
This can’t be dismissed as a fringe company leap, with attention snowballing on social media, former PayPal CEO David Marcus weighing in to criticize his former company, and Elon Musk agrees with him.
Marcus, fittingly enough, is currently the CEO of Lightspark, a company focused on Bitcoin tools, and it’s Bitcoin that differs greatly from PayPal’s confusingly misguided overreach. Controversies like this draw attention to the safeguards provided by a truly neutral payment method that is disconnected from central authorities.
Finally, another narrative set to drive crypto participation in the coming years is around web3, which is specifically related to Ethereum. Web3 is where crypto crosses over with mainstream, non-financial sectors such as art, fashion, gaming, web development and AR/VR.
Covering such a diverse range of disciplines, Web3 development has an added sheen of respectability and may have the capacity to draw in new participants who are otherwise uninterested in cryptocurrencies and bring them on board in new ways.
Until now, it has been Bitcoin that has led the way, while the rest of crypto has followed. Perhaps, in the next cycle, Ethereum will pull away to create its own web3-focused momentum, while the case in favor of Bitcoin grows ever stronger individually.
