With the prices of major cryptocurrencies rallying early into 2023, many investors and crypto enthusiasts have been wondering; has the 2022 crypto bear market ended?
- 2021 was a high time for Bitcoin and most crypto assets following the institutional adoption and government regulatory interest.
- The crypto total market cap has risen from $825 on December 20 2022, to just over $1.08 trillion in January 2023.
- A bull run or bull market applies interchangeably to indicate that the price of assets or securities such as crypto or stocks is rising in an upward trend rapidly.
Early crypto market rally in 2023
2021 was a high time for Bitcoin and most crypto assets following the institutional adoption and government regulatory interest. Many potential projects continued to inundate the market as a source of affirmative influences for users and investors. The crypto market unexpectedly turned into turmoil following the catastrophic events in 2022. With the prices of major cryptocurrencies rallying early into 2023, many investors and crypto enthusiasts have been wondering; has the 2022 crypto bear market ended?
The crypto total market cap has risen from $825 on December 20 2022, to just over $1.08 trillion in January 2023. Crypto prices have risen by close to 25 per cent in 2023. Bitcoin’s market cap stands at $442 Billion, a crypto market dominance of 40.6 per cent.
Despite the recent price rise, Bitcoin and Ethereum remain 64 and 66 per cent below their all-time highs. Although the arrival of somewhat positive US inflation data has boosted investor sentiment, it remains highly arguable that the global economy — and the cryptocurrency market — is not out of the woods as yet.
Nevertheless, similar positive outlooks from other major economies have accompanied the positive inflation data. Thus, with the recent price recovery, many people are constantly pointing towards the beginning and end of the 2022 crypto bear market.
Is a crypto bull market on the horizon
A bull run or bull market applies interchangeably to indicate that the price of assets or securities such as crypto or stocks is rising in an upward trend rapidly. A crypto bull market is no different from a traditional market. It is usually characterized by investors’ anticipation to capitalize on the asset’s price appreciation. That appreciation yields substantial returns from the investor’s initial capital.
Market consolidation is followed by significant growth for crypto prices during a crypto bull run. Thus, the crypto assets prices usually stabilize after a period of volatility, a sign of a pending bull market. Although signs indicate that a run could be on the horizon, the bull market has yet to be activated.
Factors influencing a crypto bull market
A variety of factors primarily influence a crypto bull market run. These include:
- Demand and supply: Investors’ and traders’ interests can drive the demand for cryptocurrencies, inspiring the prices to rise or fall.
- Crypto market sentiment: Technology roll-outs, new projects, optimistic crypto bulletins, and partnerships that draw investors’ interest will primarily increase the asset’s price.
- Institutional adoption: This signifies the crypto utility, which could ripple effect on retail consumers to hop on mainstream adoption.
- Political and economic factors: Political stability and economic growth helps drive crypto adoption and enhance financial inclusion.
- Scarcity of alternative investment: Low-return or slow-moving assets are less prevalent in uncertain times, causing a surge for higher-volatility, high-return assets like crypto. As the demand surges, crypto prices will naturally rise.
- Inflation and interest rate: Higher interest rates mean investors with spare cash can invest in speculative and riskier assets like high-liquidity crypto.
There are plenty of other factors that can influence a crypto bull market. It is a consolidation of reasons that also activates a crypto bear market. Of course, with macroeconomic conditions still in a precarious state. The crypto industry potentially faces several serious regulatory actions. These situations could easily undermine the gains accumulated in recent weeks.
The crypto market is still highly volatile, and there may be short-term price fluctuations before a sustained upward trend. It is also important to note that the crypto market is still relatively new, and there is a lot of uncertainty surrounding it. Thus, it is hard to predict precisely when a bull run will occur.
Confronting the 2022 crypto bear market ghosts
There are arguably plenty of contagions left to play out from November’s FTX collapse. Silvergate Bank most recently faced a bank run in the closing months of 2022. This happened as customers withdrew around $8 billion from the crypto-friendly institution. In other words, the industry could see another big blow up anytime soon. The blow-up would send prices falling again.
Similarly, the industry faces the genuine prospect of regulatory action. The US Department of Justice is still weighing up whether to charge Binance — the largest crypto-exchange in the world by volume — with money laundering violations.
Investigations have revealed that Binance processed almost $346m in Bitcoin for the Bitzlato digital currency exchange. The United States authorities arrested Bitzlato founder for allegedly running a “money laundering engine.
This comes on top of the news of Nexo’s Bulgarian offices’ raid on January 12 in connection with a money laundering case. On the same date, the SEC charged Gemini and Genesis for selling unregistered securities through their Gemini Earn product, further adding to the crypto industry’s recent woes.
Given these actions, one cannot rule out that global authorities are preparing to confront the industry through legal and regulatory means. And if some of these companies lose their battles with the securities regulator, this could negatively affect cryptocurrency prices.
As such, no one should be cracking open the Champagne just yet. Yes, prices have recovered to some extent in the past few weeks, but with the global economy still mostly slowing down its decline rather than showing real strength, it would be just too premature to conclude that the 2022 crypto bear market has ended.