Crypto, next bull market?
The ecosystem’s witnessing a staggering range of predictions on the next bull run, here’s an overview of some fundamentals.
Crypto markets are highly complex and influenced by varying factors simultaneously, thus difficult to predict their behaviour with certainty. The main factors that’ll potentially contribute to a new bull market are:
Market Sentiment and Investor Confidence — positive market sentiment and increased investor confidence play a crucial role as driving forces of a bull market. Factors that influence sentiment include (but are not limited to) favourable regulatory developments, high mainstream adoption, extensive positive media coverage and overall economic conditions.
Technological Advancements — advances in blockchain technology and the underlying infrastructure do create excitement and drive overall interest. Significant improvements in scalability, security, privacy and usability attract new investors and increase demand.
Institutional Adoption — increasing involvement of institutional investors, such as hedge funds, asset managers, banks and other legacy institutions brings about a positive impact on the entire crypto market. Institutional adoption brings legitimacy and larger capital inflows, potentially driving prices higher.
Regulatory Clarity — clear and favourable regulations that provide legal certainty for cryptocurrencies can reduce uncertainty and foster investor confidence. Positive regulatory developments, such as the approval of cryptocurrency exchange-traded funds (ETFs), attract more traditional investors into the market.
Global Economic Factors — broader economic trends may influence the crypto market. Factors such as inflation concerns, currency devaluations, geopolitical instability and low-interest rate conditions drive investors to seek alternative assets like cryptocurrencies.
Technological Breakthroughs — the emergence of new innovative projects, protocols, or use cases within the crypto space help attract attention and generate enthusiasm among investors. Significant developments, such as decentralized finance (DeFi) applications, non-fungible tokens (NFTs), or advancements in interoperability—support and stimulate market growth. Now, to further break down this segment:
Market price adjustments are frequently utterly arbitrary. The market is occasionally shaken out of its complacency and made aware that the prior value of an underlying asset no longer accurately reflects its fundamentals by a prominent event, whether it be positive or negative. Unexpected and unaccounted-for events can cause significant directional price swings. 90% of all bull markets in history have started this way if we look at the data.
For instance, the market is aware of artificial intelligence (AI) as technology has been around for a while. But it was seen as a highly specialized market with an opportunity that was deemed to be underdeveloped. The market just realized the vast potential of AI is much closer and bigger than what was priced in after one application — ChatGPT took off unexpectedly. Investors now foresee a world powered by AI. Alongside, for entire industries, the estimated outlook and market size have been altered. Significant revenue spikes from AI companies, including Marvell and Nvidia, reaffirmed the pricing trend and persuaded investors that the upswing was robust in nature.
The equity market demonstrates that the macro environment no longer acts as a barrier to price increases. But as previously mentioned, there must be a valid cause for price increases. Will crypto have the moment? Firstly, public blockchains are decentralized, open-access networks for transactions that anybody can build on. The key characteristic that made the concept so compelling was that these networks have no boundaries. Every asset on a public blockchain has instant access to global liquidity. In terms of financial access and capital allocation efficiency—there is a lot of opportunity for growth. Secondly, the programmability and modularity of these networks allow for the creation of applications more quickly and affordably, hence boosting the rate of innovation. Lastly, tokenization enables web3 projects to expand using a business model built on a community approach—increasing the rewards for contributors and customers and more equally dispersing the benefits of growth. Therefore, the potential to generate a wide range of disruptive businesses on public blockchains is massive. The DeFi adoption and NFT’s popularity, which fueled previous bull markets, could be viewed as evidence. Now, the question remains when/ what is the next “big thing” to bring this explosive growth again?
