Could we witness a crypto bull market next year?
Since the start of 2023, the cryptocurrency market has seen a meaningful recovery after a brutal bear market, with the total market capitalization of all cryptocurrencies increasing from $798.69 billion to $1.07 trillion, a 34% increase.
Much of this growth can be attributed to Bitcoin (BTC) — which recovered from its yearly lows of $15,883 in November 2022 to reach over $27,669.84 as of Oct. 10, 2023.
Overall, Bitcoin is now up a substantial 74% since its lows last year, and Bitcoin dominance has increased from 39.4% to 50.3% over the same period.
Given that the performance of the broader crypto market is generally contingent on how Bitcoin performs, there is good reason to pay attention to the OG cryptocurrency that started it all.
Also read: The Next Crypto Bull Run: Rinse or Repeat
Having recovered significantly this year, and with multiple catalysts in the pipeline, there are more than a few reasons to suspect that the next bull run is just around the corner.
The Bitcoin Halving Event
According to the CMC Bitcoin halving calculator, Bitcoin is expected to undergo its fourth halving event — seeing its inflation cut by 50% as the miner block reward is slashed from 6.25 BTC to 3.125 BTC.
Following the fourth halving, Bitcoin’s inflation rate will fall from around 1.74% today, to around 1.1%. To put this into perspective, even fiat currencies with the lowest monetary inflation easily dwarf these figures.
Source: https://www.binance.com/en/feed/post/1286229
Historically, Bitcoin has demonstrated a roughly four-year cycle centered around the halving date. Broadly, this has included a period of decline in a bear market, followed by consolidation and accumulation prior to the halving date, with a new all-time high (ATH) achieved roughly a year post-halving.
Also read: Bitcoin Halving History: A Look Back in Time
Though past performance isn’t always an indication of future success, BTC price is moving similar to how it did prior to the rally that culminated in Bitcoin reaching almost $69,000 a coin.
Source: Delphi Digital
According to recent research by Delphi Digital, Bitcoin is currently part-way through the accumulation phase of the market cycle and could be on track to achieve a new price high by Q4 2024.
This is further corroborated by PlanB’s controversial stock-to-flow (S2F) model, which quantifies scarcity by comparing existing supply to new production, forecasting price increases as halvings reduce new coin issuance. The model suggests that a new price high could be reached as early as Q2 2024.
Bitcoin Fundamental Indicators
Given the transparent nature of blockchain networks, it is possible to collect and analyze on-chain data and extrapolate meaningful insights, enabling even non-technical users to easily identify trends and effectively gauge market sentiment.
As always, these indicators are subjective and in many cases, they are an indicator of the historical performance of the market.
To gain a clearer picture, it’s important to look at multiple data points — taking into account both on-chain metrics and broader market dynamics.
With that said, several measures now point to an optimistic future for Bitcoin.
Bitcoin's annualized 30-day volatility has gradually compressed — falling to a historic low of 15.63% in August. Bitcoin’s price volatility tends to compress during a bear market and expand during market recovery.
It is generally believed that consolidation leads to a near-equilibrium between buyers and sellers. As long-term holders grow their positions while sellers reduce, volatility flattens. Bitcoin’s 30-day volatility has rarely fallen below its current figure.
Other technical indicators also suggest a significant upswing is on the way. This includes Bitcoin's realized market capitalization. This is the sum value of each coin at the price when it was last moved or transacted. This metric provides a more nuanced view of Bitcoin’s market capitalization by focusing on active coins, de-emphasizing lost or dormant coins.
Historically, Bitcoin’s realized cap has only been higher than its market capitalization during the lowest troughs of a bear market — following which the market cap expanded dramatically every time. The last time this occurred was in January 2023 — indicating the worst of the bear market could be behind us.
There are also signs that miners are beginning to consolide — indicating that miners are becoming more and more likely to hold onto their coins rather than sell them at current market prices.
As per data from MacroMicro, it currently costs an average of $32,893 to mine a single BTC compared to the current market price of $27,660. This is one of the biggest discrepancies in mined cost vs market price seen in the last 3 years.
In past cycles, Bitcoin's average mining cost has only exceeded the market price during the bear market and accumulation phase of the 4-year cycle.
Once the blue line drops below the orange line, this will be a strong signal that Bitcoin is once again in a bullish trend.
Regulatory Events
Several long-anticipated regulatory events are potentially set to take place in 2024 — which, depending on the result, could be a major catalyst for a 2024 bull run.
In June 2023, the largest asset manager in the world, BlackRock, filed for a Bitcoin spot ETF with the U.S. Securities and Exchange Commission (SEC). With an overall 99.8% approval rate for its previous ETF applications, hopes are high that BlackRock and other firms will finally be able to offer Bitcoin spot ETFs in the U.S.
The announcement sent the price of Bitcoin soaring to its highest value since May 2022 and prompted a wave of similar ETF filings in the U.S.
Beyond this, the EU is set to get one of the most comprehensive regulatory frameworks for issuing, intermediating and dealing in digital assets.
Coming into effect between mid-2024 and early 2025, MiCA governs crypto asset issuers and service providers, aiming to protect consumers, maintain financial stability, and foster innovation. MiCA distinguishes between cryptocurrencies, tokens, asset-referenced tokens (ARTs), and electronic money tokens (EMT). It mandates transparency from issuers, registration for crypto asset service providers, and adherence to anti-money laundering measures.
In 2024, cryptocurrency taxation rules will undergo significant changes in the United States, which may prove bullish for the market. For one, nonrecognition rules will apply to loans of actively traded digital assets, similar to securities lending, enhancing liquidity in the crypto market. Traders in digital assets will also be able to adopt the mark-to-market accounting method, simplifying accounting and tax compliance for frequent traders.
Conclusion
While on-chain metrics and historical trends paint an optimistic picture for a potential 2024 bull run, it's crucial to consider broader market dynamics.
The anticipation of regulatory shifts, such as the potential approval of Bitcoin spot ETFs, comprehensive frameworks like MiCA in the EU, and evolved taxation rules in the U.S., provide a conducive environment for growth.
Additionally, external factors, such as potential Fed interest rate cuts and increased institutional adoption further cement the case for a bullish 2024.
Finally, the Bitcoin halving event, which has historically ushered in the crypto bull market, should be on everyone’s radar.
This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators.
This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice.
The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.
