When Will This Bear Market End?
A question sung by many; the state of a bear market is often called into question, for they’re as pleasant as being chased by an actual bear. The moment you realize you’re in such a market is the moment you typically want to get out (unless you’ve read our previous article), but these sorts of wishes don’t come true instantaneously.
These harsh and unforgiving conditions drag on for months — if not years, and with talks of a recession on our doorsteps, there hardly seems to be a light on the horizon… or is there?
There are various scenarios that depict how and when this bear season may end, but how likely they’re to have the sort of impact we’d need to reverse the direction of this market is up to debate. Please do note that while we strive to provide high-quality information and discussion topics, this article in no way constitutes financial advice. Please contact a financial advisor for all such needs, as this blog post is intended for educational and entertainment purposes only.
With that out of the way, let’s move on to the first and most obvious scenario: The war in Ukraine ends, and global markets recover.
The tragedy taking place in Ukraine can be felt all over the world. A war of such a scale has implications that are experienced in all four corners of the globe; from sanctions to supply chain issues and uncertainty, there are numerous threats and changes that pose a danger to global markets and economies.
Should the war end in the near future, we might see these markets recover as confidence and certainty are restored. The looming fears of a recession may subside, and reignited interest in alternative assets such as crypto may pave the way to the next bull run.
However, should it drag out, we might have to wait a few years to see BTC reach a new ATH.
Speaking of Bitcoin… to hypothesize when the next bull market may kick in, we may need to look at the next halving.
For those who are unfamiliar with the term ‘halving’, it is used to describe the halving of the block rewards on the Bitcoin network. As a reward for solving complex computational puzzles, miners are rewarded with BTC. The amount is currently at 6.25 BTC, and miners often sell them, in part or in full, to cover operating costs such as electricity expenses.
The halving mechanism is an ingenious measure that serves to supplement BTC adoption. As of now, every 10 minutes or so, a hash is solved and a block is added to Bitcoin’s ledger — meaning around $195,000 worth of BTC is introduced to the circulating supply every time this occurs. However, in 2024, the rewards will be slashed to 3.125 BTC per block, which at today’s prices would be worth roughly $97,500. This eases BTC’s selling pressure, and reduces the supply in the market, leading to price appreciation.
Historically, bull runs have tended to proceed after Bitcoin halvings, and there’s reason to believe the next one will not be any different. We’re at a stage where crypto adoption is at its highest (with 2 countries already adopting it as legal tender), and has inarguably grown to be widely regarded as a safer asset than it was at the last halving.
Not quite of the same level of significance, but Ethereum’s upcoming merge may provide the support the market needs.
Currently, Ethereum’s mainnet runs on a Proof-of-Work (PoW) mechanism; meaning that like Bitcoin, miners constantly operate and complete to add the next block to the chain. However, unlike Bitcoin, Ethereum is set to transition to a Proof-of-Stake mechanism in the near future.
This event is referred to as ‘The Merge’, as it highlights Ethereum’s mainnet merging with the beacon chain, paving the way for stakers to begin validating the network instead of miners. So, how would this change sentiment in the market, and what does it mean for crypto?
Ethereum, like Bitcoin, is criticized for its energy usage. We currently find ourselves at a critical moment in time, regarding the climate and the environment, and a lot of effort is being directed towards adopting eco-friendly solutions. Since PoS blockchains consume relatively very little energy, and since Ethereum is the second-largest project in the industry — the go-to smart contract blockchain if you will — it may trigger an ETH run, subsequently potentially triggering a miniature bull run for its ecosystem.
Could another country be waiting around the corner to pick up BTC as legal tender?
The significance of a country adopting BTC as legal tender cannot be understated. It means that this grassroots blockchain network, created by an anonymous entity by the name of Satoshi Nakamoto, is being trusted on a state level to support its financial system — and rightfully so.
It took a whopping 13 years for such an instance; for a small, South-American country to place its future in the most decentralized and secure blockchain network in the world… but it took only 9 months for another to follow suit. Probabilistically speaking, a domino effect could be in order throughout the upcoming years, and there’s no need to elaborate on how multiple countries adopting BTC in a short time span could trigger a bull run.
Of course, there is a myriad of scenarios that are possible, but few are as probable as one would like.
It is possible that what we are witnessing is a correction, and that we will wake up to green charts in a few days, but is it probable? Most likely not. This market is being influenced by conflicting forces where on the one hand confidence in the industry has grown, yet on the other, the market is oversaturated with projects during uncertain times.
If one thing is for certain, it’s that holders will be tested relentlessly until the skies clear up.
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