As we head into the holiday season, and despite the snow and freezing temperatures all around, the fateful crypto winter of 2021–2022 feels like aeons ago. After losing almost 85% in less than twelve months, Bitcoin has done nothing but go up since the start of 2023. From a local low of $16,439 on 19 December 2022, BTC has now gained more than 160% to reach $43,326 at the time of writing (07/12/2023), though intraday trading has seen prices as high as $45,000.
However, while these are certainly impressive gains for any instrument, the original cryptocurrency is still well below its all-time high close of $64,400 recorded back in November 2021. History would, therefore, suggest that there could be plenty of steam left in this rally.
But with some suspiciously coordinated moves taking place on the blockchain lately and surging interest from both institutional and retail investors, many will be wondering how far and how long this bull run can last. In this piece, we'll take a closer look at some of the biggest factors at play in this latest BTC growth spurt as most traders and investors look to take stock of their portfolios in preparation for the new year.
X marks the spot
Perhaps one of the biggest and most hotly anticipated developments in the crypto market this year has been multiple investment firms' applications for a spot Bitcoin ETF. The saga has lasted multiple months now and involves major players such as BlackRock, Fidelity and Ark Invest. However, now that the SEC's maximum deferral period is almost over, a final decision is imminent. The overwhelming expectation is that the US regulator will approve several such applications all at once in order to ensure no one firm has an unfair advantage. And while several analysts, including Matt Schulz of the mining firm CleanSpark, believe that the impact of the spot ETF approvals is already priced into Bitcoin, this is far from a consensus.
Indeed, despite existing net institutional inflows, investment firms will be forced to buy additional huge numbers of BTC once the products go live. Whatever happens, however, the reality of spot BTC removes yet another barrier to crypto for more traditional investors, which can only result in more buyers over time. And thanks to Bitcoin's non-inflationary nature, a limited supply means that BTC simply must rise in price over time as more buyers come forth for fewer and fewer free coins, an effect that will only intensify as mining becomes even more difficult.
Beware of the whales
As has always been the case with Bitcoin, whales (holders with more than 1000 BTC) have had significant power to affect the market. And even though the cryptocurrency market, Bitcoin, in particular, is now much less susceptible to these massive swings since widespread retail and institutional adoption, it's still a risk.
Following an analysis of order book liquidity cues, trading resource Material Indicators suspects that the current positive movement could be part of a choreographed whale move to engineer higher prices that would then allow them to sell into an uptrend with low slippage. The logic behind this is that the more liquidity there is in and around the intended selling point, the better the average price whales would get during a major sell-off. Now, there is $50 million stacked at $38,500 and even more bid liquidity amassing around $41,500, which Material Indicators doesn't believe to be "organic".
But this doesn't mean that we can expect a sharp crash immediately after the whales take some profit. After all, they're still major holders, and a bear market isn't in their interest either. The idea of stacking liquidity around these key levels is, in fact, to cushion the blow of their large coin sales, though traders should be ready for some setbacks as prices take time to stabilise. Since many whales are also miners, we expect them to have an eye on the upcoming halving in 2024, which is expected to increase difficulty, reduce per-block rewards, and buoy prices due to the increased scarcity.
The "B" word
As anyone who's been following the cryptocurrency market for any extended period of time will tell you, during times of mega gains in BTC, there's always the lingering spectre of the wheels falling off at any moment. Yes, bubbles and Bitcoin have gone hand in hand ever since and even before crypto rocketed into the public consciousness back in 2017. The first came way back in 2011 when Gawker published an article about an untraceable digital currency that could be used to purchase illicit goods online. But this was still when Bitcoin was an obscure instrument nobody had heard of.
Then came BTC's first big bubble, in which the original cryptocurrency shocked us all by rising from under $1000 in January 2017 all the way up to $20,000 by December of the same year. Needless to say, the fall from grace was epic and saw the coin lose a full 80% over two years of steady declines. The next bull run in 2020–2021 was just as quick on the up but consisted of a double crest and dip pattern, which saw the coin lose around 75% from its peak in November 2021.
However, the bear market was much shorter (just six months), and over half of the losses have already been regained. Now that we have widescale adoption, including from institutions, the swings in BTC and fear of it "going to zero" are much more controlled, which will help avoid sharp crashes and extended bearish sentiment going forward.
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