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Is this the end of Bitcoin’s four-year bull/bear market cycle?
With the Bitcoin halving just around the corner, it certainly seems like we’re on the verge of something big. While everyone’s eyes are glued to the skyrocketing bitcoin (BTC) price and the possibility of reaching record highs, the ripple effects are far-reaching. They will touch every corner of the cryptocurrency market and may even mark the end of the four-year bull/bear cycle of cryptocurrencies.
This feature is part of CoinDesk’s “Future of Bitcoin” package released in conjunction with Bitcoin’s fourth “halving” in April 2024.
Daniel Polotsky is the founder of CoinFlip.
However, it’s not just a question of numbers; it’s about the potential for a sea change in how we perceive and interact with digital currency. Get ready: this could be the beginning of a whole new era for cryptocurrencies.
This transition marks a more widespread recognition of cryptocurrencies as a legitimate asset category, marking the beginning of a new phase in institutional investing. It has also further strengthened the credibility and accessibility of Bitcoin for retail investors.
These fundamental developments allow investors to gain exposure to Bitcoin without the complexities associated with direct ownership. Increased liquidity and stability will likely continue to attract a broader range of investors, resulting in greater mainstream adoption and uptake helping to further fuel bitcoin’s current valuation surge.
Despite the apparent bullish momentum in the cryptocurrency market, several factors could disrupt this trajectory. Persistent inflation could prompt tighter monetary policies, hitting riskier assets such as cryptocurrencies. Slow economic growth could also undermine investor confidence, drawing attention away from speculative investments.
Another near-term concern lies in the bitcoin mining sector. The impending 2024 halving is expected to trigger significant consolidations and defaults, as cash-strapped mining companies struggle with tighter profit margins and high operating expenses. This could force them to sell their bitcoins when they go bankrupt, which could keep the price low. Additionally, regulatory scrutiny and lack of financing pose challenges, potentially putting downward pressure on prices.
The uncertainty surrounding the 2024 election adds another layer of unpredictability. The political outcomes could lead to several regulatory changes, with potential changes in the US government’s stance towards cryptocurrencies. While a Republican presidency could offer a more favorable regulatory environment, Democrats could become more receptive to the sector due to alignment with values such as financial inclusion and environmental sustainability. This could potentially foster bipartisan support for cryptocurrency regulation.
Perhaps most tempting of all might be the sudden side effects of halving. While it has historically been a driver of bull cycles, the impact of the halving may be overshadowed by the other factors mentioned above, such as Incredible net ETF inflows. Total net inflows have exceeded 15 billion dollars.
The strategic intervention of institutions and retail ETF investors led by more experienced financial advisors, adept at “buying on dips”, appears to be a factor that could potentially dampen the effectiveness of the halving in moving the market forward.
This would mean the end of the typical four-year bull/bear cycle of cryptocurrencies, seemingly tied to the bitcoin halving, and instead suggest a relatively stable upward growth trajectory, with ETF inflows emerging as the primary catalyst for cryptocurrency adoption. Interestingly, this is the first time the price of bitcoin has skyrocketed Before the halving, which the previous year had preceded the bullish runs of bitcoin.
This change could have profound effects across the industry. Initially, the cryptocurrency ethic was rooted in a countercultural resistance against centralized currencies and institutions with the mantra “not your keys, not your coin.” It now appears that the predominant force in the cryptocurrency industry may soon be controlled by a handful of institutions, with ownership dispersed among individuals who do not have access to their own keys, contrary to the original ideals of decentralization.
A tilt toward institutional ownership could lead to something even bigger: ownership of bitcoin by sovereign nations. Other countries may follow El Salvador’s advantage and start a race to accumulate cryptocurrency, potentially kicking off a super cycle of global mainstream adoption.
This change could also lead to a move away from the intense boom and bust cycles traditionally associated with cryptocurrency markets, fostering a more stable environment for growth and development within the industry.
While fewer retail investors will experience the euphoria of a bull market, the good news is that they will also be spared the brutal reality of buying at the peak and having their face stolen as the market crashes.
This new stability could provide crypto companies and projects the opportunity to focus on long-term sustainable development, rather than timing market cycles and facing extreme headwinds during crypto winters.
As investors and enthusiasts prepare for more volatility, it is clear that the market is on the verge of unprecedented growth and, potentially, a fundamental paradigm shift. While bittersweet, this upcoming period could be seen as the end of cryptocurrency’s infancy, marking a significant evolution in its history. Before saying goodbye we should all be ready to celebrate her Last Dance.