The crypto market entered a bull market phase after Bitcoin's halving, which promoted the bull cycle for Bitcoin. Consequently, a lot of cryptocurrencies have reached record-high prices. But, the crypto market is still in development, and there are different factors that can promote the value of cryptocurrencies, and at the same time, certain factors impacted the current bear cycle, mainly driven by Bitcoin's decline in value that happened in mid-2021. If you're new to the crypto world, and all of this sounds too vague and confusing, in this article, we have compiled a list of the main factors that trigger a bull and bear market phase in the crypto market.
Higher Number of Investors
In the crypto market, there are a lot of investors, including retail and institutional investors, but because this is a market that is still developing, whenever there are great investments by individual or institutional investors, this can have a ripple effect on many cryptocurrencies on the market.
Some of the greatest investors in the crypto market are companies like MicroStrategy and Tesla. In fact, Tesla has had an investment of $1.5 billion in BTC, and this has promoted the growth of the cryptocurrency in a very short period of time from approximately $50,000 to $63,000. MicroStrategy is another great investor that has had a crypto investment total of over $3 billion.
Overall, the crypto market is expanding due to the significant interest by financial institutions as well as institutional investors and any other investor that is able to allocate great capital into cryptocurrencies. The rise of not just individual investors, were also institutional investors, and favorable regional as well as government policies prompted the rise of the crypto market and also impacted the growth of specific cryptocurrencies.
Business Support
One of the main components of bull cycles is the support from the business sectors. When there are businesses that accept crypto transactions, this drives the price of the currency and can promote a bull market phase.
Another example was the latest bull cycle of the crypto market when a lot of reputable companies decided to accept crypto transactions like Square, Venmo, PayPal, Home Depot, Microsoft, and many others. Currently, there are over 10,000 of new businesses worldwide that accept cryptocurrencies.
Another example would be online casinos which actually accept crypto payments with open arms. You will find an increasing number of crypto casino sites that allow you to wager with your cryptocurrencies on your favorite online slots, table casino games, live dealer games, and many other options. This also drives the reputability of the crypto market and the demand for cryptocurrencies.
Market Supply and Demand
The relationship between supply and demand is the most important factor which will drive the bull or bear cycle of the cryptocurrency. As we mentioned, the crypto market is still in its infancy, so whenever there is a huge demand or supply, this will reflect on the price of the currency.
Moreover, most cryptocurrencies are created to work as decentralized virtual currencies, which means that their supply can be limited from the beginning, as it's the case of Bitcoin, or they can also have an infinite supply of tokens; either way, this is one of the crucial factors which will promote the growth of the currency. One example of a great bull market phase is Bitcoin's bull cycle in 2020.
This happened because not only BTC initial supply was set to 21 million tokens, but also the last halving has cut in half the ongoing supply of BTC. This has resulted in a market capitalization of over $500 billion and a high price of Bitcoin of over $60,000 in 2021. Moreover, the demand, which, as we said, is fuelled by institutional and business support, can definitely create a bull run for specific currencies, especially when there are prominent influencers like Elon Musk on the market that share their decisions and investments in crypto with the public.
Current Bear Cycle
So, if you're wondering what got what the main factors which triggered the bear market phase after 2021 , we need to cover some of the factors which were not only related to Bitcoin but other cryptocurrencies in general.
First things first, a bear market is defined by a dip of 20% or more. Another indicator is that the prices continue to fall continuously, which results in investors holding onto their existing cryptocurrency positions or short-selling and diversifying their portfolios in order to minimize the risks.
The bear cycle was also noticeable in Bitcoin, which also dragged other cryptocurrencies into a bear phase. Bitcoin has reached a maximum value which coincidentally was impacted by Tesla's investment on 10 November 2021 when it reached an all-time peak value of $68,789.63. Fat forward to 2022 Bitcoin's value has dropped to $20,000, and it's remained more or less within that range in 2023. Soon enough, the entire crypto market was affected by global events and entered a bear market phase.
A bear market phase is driven by the ratio of supply and demand. As we know, the crypto market is quite volatile, and 'small' events like Elon Musk's tweet can have a ripple effect on the entire market. But, also, the crypto market isn't immune to huge global events that, in this case, brought about the bull market phase.
Another significant event was the decision of Elon Musk not to support major currencies in May 2021; Elon Musk publicly said that crypto payments were not supported at Tesla because crypto mining was unsustainable and linked to climate change.
The stock market has gone into a downturn due to the war in Ukraine, higher interest rates, and inflation. Moreover, the FTX had compassed by 2022, which further impacted the bear cycle that continued well into the next year.
Predictions for the Future
In the crypto market, there is high volatility which is why we don't expect the crypto market to be stuck for a considerable time in a bear cycle. Even though the bear market is associated with negative sentiment, it is a good time for some inventors to diversify their portfolios.
Otherwise, it's predicted that the next Bitcoin halving can happen sometime in 2024, and then again, there will be a renowned interest in Bitcoin and other cryptocurrencies in the market. Furthermore, many governments around the world are looking to regular cryptocurrencies, which is actually a good thing offering more opportunities for businesses as well as individual investors to invest in crypto.