Investors love to hear what they want to hear.
Some of the biggest players in the crypto industry are currently pushing a new narrative, claiming that the true crypto bull market hasn’t even begun. In the wake of the October 10 crypto crash, such messages are likely to reach a very receptive audience of investors who are still desperate to recoup some of their losses.
But is a crypto bull market really about to kick off with enthusiasm, or is the narrative simply compelling copy as it promises a euphoric phase of the market to come? And how do these predictions fit into crypto’s widely held beliefs about the four-year nature of the market cycle, mediated by Bitcoin (BTC 0.32%) and its halving schedule?
Image source: Getty Images.
Chatter is not about the price table
Let’s answer the second of the two aforementioned questions first.
In a nutshell, many crypto investors believe that the crypto market as a whole tends to follow a four-year market cycle based on Bitcoin. The Bitcoin halving date is generally considered the midpoint of the cycle, with investors assuming a new market cycle begins two years before the halving, which according to theory is almost always a bear market year.
So the general trend is this: there is a one-year bear market, a year of strong recovery and growth leading to the halving, another year of stronger growth, and then, in the final year, a period of parabolic growth and speculative excess that ultimately ends with a crash and a bear market to restart the cycle. By this logic – which, by the way, is not empirically proven – the crypto market is currently in what is expected to be its final months of a vigorous upward march.
Today’s change
(-0.32%) $-302.31
Current price
$95077.00
Key Data Points
Market capitalization
$1,897 billion
Daily scope
$93029.00 -$96528.00
52 week range
$74604.47 -$126079.89
Volume
77B
Average flight
0
Gross margin
0.00%
Dividend yield
N / A
Now let’s map this to what has actually happened over the past few years.
Bitcoin bottomed near $15,500 during the collapse of crypto exchange FTX in November 2022, and three years later it is trading at nearly $102,000, a gain several times higher than the trough, just as the cycle theory predicts. Ethereum (ETH 0.12%) fell to around $880 in mid-June 2022 and now sits near $3,450, again a significant multiple from the low. Likewise, Solana (GROUND 0.31%) reached around $8 in late 2022 and is now trading at $153. Many other cryptocurrency majors exhibit the exact same pattern.
There’s no denying that this type of growth is what roaring bull markets look like. So the idea that we’re still warming up before the game for an upcoming bull run is a little hard to believe.
Meanwhile, the structure of the crypto market is significantly different than in the past. Spot Bitcoin, Ethereum, and now Solana exchange-traded funds (ETFs) add continued buying by retirement accounts and financial institutions, and even after periodic outflow streaks, the ETF complex posts significant net entry days that move the needle on the price of the underlying assets.
Today’s change
(-0.12%) $-3.75
Current price
$3135.77
Key Data Points
Market capitalization
$378 billion
Daily scope
$3023.62 -$3241.23
52 week range
$1398.62 -$4946.05
Volume
32B
Average flight
0
Gross margin
0.00%
Dividend yield
N / A
The path ahead will still be marked by powerful favorable winds
So, is the real crypto bull run about to begin?
Most stock market investors would be euphoric in response to the crypto market’s recent performance, whether they call it a bull market or otherwise. Bitcoin cycle theory, putting aside the question of whether it’s true, also suggests that there likely won’t be a broad uptrend on the way for at least a few quarters.
However, the context already presents several lasting factors that could continue to support prices in the years to come.
First, persistent offers from financial institutions and asset managers offering ETFs are changing who owns crypto and how they behave. Record weekly crypto ETF inflows in early October, led by US ETFs, highlight that institutional capital is still being integrated and there may be a long way to go. The presence of these vehicles makes a widespread, timed exit phase after a parabolic run a much less plausible scenario than in previous cycles.
Today’s change
(-0.31%) $-0.44
Current price
$139.01
Key Data Points
Market capitalization
$77 billion
Daily scope
$135.28 -$143.06
52 week range
$96.70 -$293.31
Volume
5.1B
Average flight
0
Gross margin
0.00%
Dividend yield
N / A
Second, the real economic activity of the chains is increasing. Solana’s daily transaction counts and active users remain high, validating its low-cost, high-throughput design for consumer and decentralized finance (DeFi) use cases. And the Ethereum ecosystem retains much of the traction it accumulated during the 2021 bull market.
Assuming ETFs continue to gather assets and on-chain usage grows, crypto’s path of least resistance could be higher prices. The trend will likely be punctuated by declines or even bear markets, and there is always the possibility that sentiment will spiral out of control relative to fundamentals.
So don’t worry about whether crypto investors are right about the Bitcoin market cycle theory or whether it’s a good time to participate in the market. Just stay focused on accumulating quality crypto assets and holding them over a five-year investment horizon, and it doesn’t matter whether the cycle theory is true or not because you’ll end up buying and holding for more than one full cycle anyway.
