A bull run is coming. When will crypto go up?

When we zoom out and evaluate the cryptocurrency asset class over its 14-year history, a distinct pattern of boom and bust cycles becomes apparent. Like the stock market, bear markets occur after lucrative bull runs, but one of the key differences is that with cryptocurrency, these cycles appear to be more pronounced.

For the majority of the past year, the cryptocurrency market was decimated. In part due to scandals, contagion and overzealous companies exploiting an influx of capital in an unsustainable way, nearly every cryptocurrency lost significant value in 2022. And the macroeconomic backdrop of rising interest rates and decades of high inflation further thwarted any hope of a respite.

But there is reason to believe that the worst may be coming to an end.

Previous bear markets shed light on the road to recovery

To analyze when a bull market might re-emerge, it can be helpful to look at the last durations of bear markets. Furthermore, because so much of the value in the cryptocurrency asset class is allocated to Bitcoin (BTC -1.10%), we can limit our evaluation to just this coin and let it serve as a proxy for the industry. Usually, as Bitcoin goes, so goes the rest of the market.

To begin with, let’s define a crypto winter as an event when Bitcoin loses more than 75% of its value, which has happened three times in the last decade.

It first fell from an all-time high (until then) of $1,133 on November 29, 2013, down to just $172 by January 14, 2015 – a drop of more than 85%. This bear market lasted 411 days from peak to trough.

Finally, Bitcoin regained momentum and reached a new high on December 16, 2017, when it reached $19,587. Almost exactly a year later, it had fallen to just $3,255 – an 83% drop.

Like previous cycles, Bitcoin slowly began its winding climb to a new (and its most recent) all-time high of $68,790 on November 10, 2021. Since then, it has fallen significantly as the aforementioned scandals plagued the crypto industry and resulted in a mass selloff over the entire market.

This is where a bit of speculation comes into play. Optimists might hope that when Bitcoin fell all the way to $15,559 on November 9, 2022 – a 77% decline – it represented the true bottom of the bear market. If this is the case, it puts this bear market at about 366 days and within the average duration of previous declines.

Based on past crypto winters, it seems Bitcoin may just have put the worst in the rearview mirror. But only time will tell if this is indeed the case and we have turned the page on this latest crypto winter.

At the moment, however, there is reason to believe that this bear market will end as in the past because the entire crypto market has risen more than 40% year to date in 2023 and has once again passed the $1 trillion market cap.

If this pans out as crypto investors hope, then buyers at today’s deeply discounted prices have the most to gain in the long run. Bitcoin may finally have gained enough momentum to thaw this crypto winter and drag the rest of the market with it.