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Does the crypto market rally have legs?

By Team Insights Focus

  • 29 Mar 2024
Does the crypto market rally have legs?

The recent bull run in the crypto market, led by Bitcoin, has set tongues wagging in the investor world. To be sure, the nearly 63% surge in Bitcoin prices this year is phenomenal. Still, it is important to understand this in context to see if this rally has legs since India is a prominent crypto market, home to some of the leading exchanges, such as CoinSwitch and WazirX.   

For context, Bitcoin is not the only asset that is rallying: most stock markets worldwide are near record highs, as are gold and bond prices. The obvious catalysts are the AI hype, a strong global economy, and expectations of interest rate cuts. But Bitcoin’s returns have surpassed that of most assets. The world’s largest crypto constitutes 50% of the total digital asset market, and its price acts as a proxy for the overall crypto market. That said, let us understand the specific factors that drive the price of Bitcoin and the crypto market in general, as well as the opportunities for investing offered by crypto apps such as CoinSwitch and UnoCoin.  

Understanding a bull market 

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A crypto bull market is a period when prices increase across various digital assets. Widespread bullish sentiments, increased investor activity, and significant upward price movements often characterize it.

The market is said to be bullish when prices are rising and expected to continue rising. A bullish phase can last months or even years. However, the onset is hard to predict. A bull market encourages buying, and investors can benefit by employing “buy and hold” or HODLing strategies.

Crypto bull runs – A timeline

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Crypto bull runs play a vital role in the overall growth of the crypto market. Let's take a look at some of the notable bull runs in crypto history:

2013 bull run: After its inception in 2009, the crypto industry took some time to get going. In 2013, Bitcoin experienced its first major bull run when its price surged from around $13 in January to over $1,100 in December. 

2017 bull run: The bull run of 2017 can be considered the most famous, referred to as the "crypto craze" or "Bitcoin bubble." Bitcoin's price increased from around $1,000 in January to nearly $20,000 in December that year.

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2020-2021 bull run: The most recent bull run began in late 2020 and continued into early 2021. The rally saw Bitcoin hit its all-time high of $69,000. The bull run was fueled by factors like institutional adoption, increased investor interest, and Bitcoin's mainstream popularity. This period also witnessed the emergence of decentralized finance (DeFi) and non-fungible tokens (NFTs). 

So, is 2024 going to witness another crypto bull run? Some tell-tale signs are there, but we can never accurately predict these significant market shifts. Let's look at some of the factors that are likely to trigger the next crypto bull run, starting with the most obvious: Bitcoin's halving. 

Bitcoin halving  

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Bitcoin halving occurs approximately every four years or after 2,10,000 blocks have been mined in the Bitcoin network. During halving, Bitcoin miner's rewards are cut in half. This reduction in mining rewards reduces the rate at which new Bitcoins are created, ultimately decreasing the overall supply of Bitcoin. This, in turn, drives up the price of Bitcoin due to the demand-supply imbalance. 

Bitcoin network has experienced three halving events so far in 2012, 2016, and 2020. The upcoming April 2024 halving will be the fourth. During this halving, the mining reward will reduce to 3.125 Bitcoins, a 50% reduction from the previous reward of 6.25 BTC for each block validated on the blockchain.

Besides, according to patterns observed in past halving events, Bitcoin halving has always been associated with bull runs in the crypto market.

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Approval of Spot Bitcoin ETFs

2024 brought good tidings for the crypto market with the approval of Spot Bitcoin ETFs by the US Securities and Exchange Commission (SEC) on 10 January. The immediate effect was that Bitcoin prices skyrocketed to record highs, but the arrival of spot ETFs had broader implications. Most importantly, the creation of ETFs signals the acceptance of Bitcoin as an investment asset. 

Spot Bitcoin ETFs provide a regulated avenue for investors to gain exposure to Bitcoin without directly owning the crypto. Bitcoin ETFs have also attracted institutional investors in droves. 

Blockchain technology to drive the crypto market  

Industry experts say that the full potential of blockchain technology is yet to be realized. In recent years, blockchain has showcased its potential by breaking the barriers between Web2 and Web3, revolutionizing sectors like crypto, AI, and the metaverse. This convergence has led to significant market growth and transformative advancements across multiple sectors. Technological innovations coupled with the development of DeFi or Decentralized Finance (DeFi) could contribute to a bull run in the crypto market.

Spotlight on Indian crypto exchanges

India is a prominent crypto market, as some of the country’s major cities account for a good proportion of crypto users. There is increasing awareness among India’s largely young investors that crypto should be a part of one’s portfolio and traditional investments such as stocks and gold. When the last crypto bull run happened in 2021, cryptos were already popular in India. With the 2024 rally triggering interest among newbie investors, discussions often center around some of India's prominent cryptocurrency trading platforms, such as CoinSwitch, the country’s largest crypto app with over 2 crore users. WazirX and UnoCoin are some of the other prominent crypto exchanges.

CoinSwitch: Founded in 2017, CoinSwitch is now India’s largest crypto app. The Bangalore-based firm is backed by some of the world’s leading investors, including a16z, Tiger Global, and Sequoia Capital India.

WazirX: WazirX, founded in 2018, is another crypto platform that offers BTC, ETH, and XRP. The exchange also has its native crypto, WRX. 

UnoCoin: Launched in 2013, it is India’s oldest crypto exchange. Popular as a specialized platform for Bitcoin trading.

Conclusion

It is just the third month of the year, and the crypto market has seen Spot Bitcoin ETFs getting approved and Bitcoin hitting a new all-time high even as investors keep their fingers crossed over likely approval for Ether ETFs. The road ahead looks promising, especially with events like Bitcoin halving lined up. While no one can predict market movements, some recent developments bode well for the crypto market and lend support to talks of a big bull run. 

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