What Does it Take for the Cryptocurrency Market to Restore a Bull Market in 2023?
In 2022 the cryptocurrency market experienced a number of plummeting events after its total market cap fell from $2 trillion and the price of bitcoin and cryptocurrencies fell sharply with it. Bitcoin’s price fell by more than 70% from its all-time high of $69,044.77 reached in November 2021 to nearly $12,000. Cryptocurrencies have been affected even more than Bitcoin. For example, the price of ETH has fallen by around 90%. The situation is even worse for other cryptocurrencies that have fallen even more in value. Reasons for the Cryptocurrency Market Bear Market
Stock Market Connectivity with Crypto Markets
The ongoing crypto bear market has sparked unprecedented fear, depression, and uncertainty among investors. The unique aspect of the 2022 bear market is that both the stock market and the cryptocurrency market are in a downward spiral, which is inextricably linked to the outbreak of the new crown epidemic. Not only that but Bitcoin has correlated to the stock market for much of 2022 because many institutional investors who invest in the stock market have also put money into cryptocurrencies. Due to this correlation between the crypto and stock markets, they are both affected by changes in macroeconomic variables such as interest rates and inflation.
It was a year in which the S&P 500 index fell by more than 21%. The prices of Amazon, Google, and Elon Musk’s Tesla fell by 39%, 27%, and 45% respectively. The main reasons for this trend include uncertainty caused by events such as inflation and the conflict between Russia and Ukraine. In addition, investors and analysts have been predicting a global recession for much of 2022.
International Market Reasons
There is more than one reason for the crypto bear market, there are also many international market influences. For example, the conflict between Russia and Ukraine has led to a significant increase in fuel prices. As global inflation increased, the US began to raise interest rates to curb inflation and the rise in national interest rates led many investors to avoid investing in risky assets such as cryptocurrencies. However, the US has continued to raise interest rates and increase them in order to ease inflation; which has also prolonged the bear market on the other hand.
How Long Can the Cryptocurrency Bear Market Last?
Many investors want to know when the cryptocurrency bear market will end so they can plan their investments in advance. The good news is that the cryptocurrency bear market started to improve in early 2023. The average length of a cryptocurrency bear market is about 359 days. Therefore, it could take about 38 months to go from the bottom to the recent all-time highs.
In fact, the crypto bear market from 2012 to 2015 lasted 415 days; while the 2017-2018 bear market lasted 365 days. Finally, the 2019-2020 bear market lasted 260 days. The length of these previous bear markets, therefore, gives us a clue as to how long it can last.
In mid-January 2023, the number of Bitcoin traders was increasing as seen in the Top 10 cryptocurrency exchange Gate.io; with an average daily volume of 26,418 million and the BTC price had recovered above $20,000. The price of Ether has also recovered to above $15,000. A cryptocurrency bull market is just around the corner.
What Does it Take for the Cryptocurrency Market to Restore a Bull Market in 2023?
Bitcoin Halving Event
If there is to be a recovery from a bear market, the occurrence of a major crypto-related event will be more helpful. The next bitcoin halving event will occur in 2024 and is likely to push the bitcoin market into a bull market. In the past, the price of bitcoin has rallied after halving events; and has had a positive impact on the crypto market as a whole. Bitcoin’s price also rose to all-time highs after the halving event in 2020.
Crypto Market Development and Regulation
Some countries are starting to introduce comprehensive regulatory regulations and constraints for the cryptocurrency market. In the US, the Securities and Exchange Commission is set to introduce the right legal framework to govern the institution of cryptocurrencies. Although not many countries are currently participating, such legislation will boost investor confidence.
Previously, the collapse and liquidation of some established crypto projects (such as Celsius and FTX) severely disrupted the market and investor interests. What is needed now for the market to recover is confidence in the sector.
In the meantime, it is important that investors choose their cryptocurrency exchanges and investments, and Gate.io Cryptocurrency Exchange was the first to come forward after the incident, stating that Gate.io had proposed the use of a Merkle tree + third-party audits as early as 2020, and hired an independent virtual currency accounting audit firm, Armanino LLP, to help with the audit. Armanino LLP was hired to help conduct the audit and provide Gate.io users with professional and credible asset verification services.
Investment-Friendly Economic Policies
The introduction of appropriate economic policies is also likely to prompt a recovery in the bear market. For example, if the US were to stop raising interest rates, this could increase consumer purchasing power.
Conclusion
The bear market in several crypto markets has been caused by a number of factors. Some of the causes include hacking of exchanges, cryptocurrency crashes, and macroeconomic variables such as inflation and interest rates. Most cryptocurrency bear markets last between 260 and 415 days. In addition, significant developments in the sector, such as the NFT boom; and the growth in the size of DeFi product adoption, could also fuel a crypto bear market recovery.
