Bitcoin is in the middle of a massive rally, but will it last?
While the market is recovering from Terra’s collapse, the bankruptcy of leading DeFi players such as Celsius and Voyager, and the high-profile collapse of FTX, favorable sentiments have finally resurfaced for the cryptocurrency market.
According to CoinMarketCap, the overall market cap, which was $982bn at the time of writing, is approaching the $1 trillion mark due to bullish sentiment, a level not seen since November 2022.
Meanwhile, the latest US job data show that the unemployment rate has dropped dramatically, with job growth far exceeding pre-pandemic levels and the unemployment rate reverting to a 50-year low.
Similarly, US inflation fell to 6.5% in December, marking the sixth consecutive monthly decline since a high in mid-2022 and lessening pressure on the Federal Reserve to raise interest rates aggressively.
Consequently, most crypto assets saw a mini-rally due to an optimistic investor mood fueled by favorable macroeconomic variables. Could all of this hint that another bull market is about to begin?
What do the metrics say?
Santiment, a blockchain analytics company, tweeted a critical measure about BTC on Saturday. According to the tweet, the number of BTC addresses holding 100 to 1,000 BTC is going up fast.
According to the data posted in Santiment’s tweet, over 416 addresses are holding between 100 and 1,000 BTC. This is a 3.04% growth in the last eight weeks. According to the tweet, price pumps are expected in the market when whales accumulate BTC.
Meanwhile, crypto-related stocks have risen with the cryptocurrency market in recent weeks. For example, after months of decline, Coinbase Global Inc. (COIN) and Marathon Digital Holdings Inc. (MARA) shares are up around 42% and 81% in the last five days, respectively.
Another reason BTC might surge over the coming months is that next year, 2024, is the year of bitcoin’s halving. Every four years, the bitcoin halving event occurs. As a result, bitcoin incentives to miners are cut in half (miner compensation will be decreased from 6.25 BTC to 3.125 BTC).
This occurrence is widely seen as favorable for bitcoin’s price since halving aids in supply contraction. Historically, halving has been seen as a promising indicator for restoring Bitcoin’s price.
And the experts?
Anthony Scaramucci, a millionaire investor and the head of SkyBridge Capital, a major venture capital company in the Web3 field, told CNBC last week that 2023 would be a “recovery year” for bitcoin, with bitcoin trading at $50,000 to $100,000 in two to three years.
Bill Tai, a venture capitalist and entrepreneur, predicts that bitcoin might drop as low as $12,000 before regaining value. Tai said that the beginning of a bull run is likely a year away and that the repercussions of the FTX collapse might be felt for an additional six to nine months.
The bottom line
Although BTC has made a spectacular debut this year, it may reach a lower bottom in the coming months before beginning its next bull run. Before a meaningful cryptocurrency rally starts, expect a significant amount of sideways volatility.
However, this decline does not suggest that markets will fly to new heights immediately afterward. Instead, as with the preceding bitcoin cycle, it is more probable that the second half of the year will be characterized by a “sideways” movement before the next bull commences.
Moreover, the regulations anticipated to emerge in 2023 and later years will be vital and incisive from every vantage point.
As the digital assets ecosystem saw several breakdowns in 2022, expanding and restructuring the ecosystem in partnership with global authorities will attract extensive investor money, which may eventually pave the way for more bull runs.