Price fluctuations are a common phenomenon in financial markets. When these fluctuations happen over the long run, they tend to be known as market cycles. Like in any other financial market, market cycles begin in cryptocurrencies when investors accumulate them when prices are low, steadily increasing their price. When crypto prices reach their peak, investors start to offload their assets, initiating a downtrend.

The constant ebb and flow in these prices are what leads to bull and bear market cycles as well. Primarily, there are four phases in a market cycle- the accumulation phase, markup phase (bull run), distribution phase, and markdown phase (bear run). This cyclical pattern has been noticed several times in Bitcoin as well. But what exactly is a bull crypto cycle, and how does it begin in the first place? Tag along to find out.

What is a bull crypto cycle?

A bull cycle is identified when the prices of cryptocurrencies constantly rise for a prolonged period of time. During bull cycles, the majority of investors are bullish, demand outweighs supply, and market confidence is high. Other factors, such as bitcoin halving, institutional investors' participation, interest rates, and innovations in the crypto industry, can also trigger bull cycles. Although correctional phases do take place during bull cycles, they are usually short-lived

First Bull Run (2013)

Market experts claim that Bitcoin has seen three major bull runs in its history. The first major bull run was observed in 2013 when the value of Bitcoin surged nearly 6000 percent, rising from $12.5 at the start of the year to $754 by the end of the year. Consequently, the crypto market capitalisation also increased to $1.2 billion. The main reasons for soaring crypto prices in 2013 were the rising popularity of Bitcoin, increased transactions on crypto exchanges, and growing demand for Bitcoin in China.

Also Read: Is the US government involved with Bitcoin’s recent price drop

Second Bull Run (2017)

After the 2013 bull run, Bitcoin prices fell sharply and traded between the $300-$400 range, from 2014 to 2015. The slump followed news that China had put a blanket ban on crypto trading, limiting investments Chinese individuals could make in cryptocurrencies.

However, Bitcoin gradually spiked to $500-$600 in mid-2016 and crossed the $1000 range towards the end of the year. In December 2017, prices peaked at $20,000, marking the second major Bitcoin bull run. During the same period, a growing number of crypto exchanges cropped up around the world, offering investors a chance to trade cryptocurrencies. The emergence of stablecoins and growth in Ethereum's smart contract technology contributed to the positive sentiment during the same period as well.

Third Bull Run (2021)

Bitcoin prices declined after the 2017 bull run and entered a markdown phase in 2018. Throughout 2018, Bitcoin traded between $3000 and $5000. Many causes appeared to have prompted the bear run, including inflation and economic concerns, the SEC denying Bitcoin ETF registration, and digital behemoths Facebook and Google prohibiting ICO ads and token sales on their platforms.

However, technological innovations in the industry continued to advance despite weak crypto prices. By the end of 2020, the NFT and blockchain gaming industries became the next big trend in the sector. On the back of these innovations, Bitcoin prices skyrocketed to almost $65,000 in April 2021, marking its third major bull run.

Also Read: What is Bitcoin funding rate and why does it matter

The Present Scenario

The 2021 crypto boom faded in the second half of the year and weak prices continued to feature in 2022 amidst worsening macroeconomic conditions and tightened monetary policies. At the same time, the crypto witnessed major crashes, such as the fall of LUNA and the bankruptcy of prominent crypto exchanges like FTX, Celsius, and 3AC, among many others. This had a detrimental effect on investor confidence. Eventually, the total crypto market capitalisation plummeted to $900 million in 2022, from a peak of $3 trillion market cap in 2021,

However, since early 2023, the situation seems to have improved. In December 2022, Bitcoin was trading at $16,000, but its price has recovered to over $26,000 as of May 15, 2023. In April 2023, Bitcoin briefly surpassed the $30,000 level as well.

Dan Morehead, the CEO of asset management firm Pantera Capital, believes that currently, blockchain assets have reached their lows and the industry is in the next bull market cycle regardless of what happens in the interest-rate-dependent traditional asset classes.

Also Read: Is Binance going bust? Spot market outages and BTC outflows spark fears

On the other hand, global investment management firm Bernstein reported that the new crypto cycle is still not fully recognised, despite positive factors such as macro catalysts, new bitcoin mining cycles, Ethereum upgrades, and developments in layer-2 scaling solutions like Arbitrum.

Conclusion

Unfortunately, it is impossible to predict the exact timeframe of any bull crypto cycle, and some even fall for wrong signals known as bull traps. Bull traps occur when the price of an asset rises briefly after continuously declining for a prolonged period. This price action traps traders who perceive it as a chance to place long positions, but ultimately suffer losses when prices go down again.

Hence, it is necessary to keep observing metrics such as total volume locked (TVL), daily active addresses (DAA), funding rates, spent output profit ratio (SOPR), etc. The values of these indicators tend to rise when the market shows positive signs. When combined with technical and on-chain analysis, it becomes easier to observe patterns and make rational investment decisions.

Also Read: What are the fastest-growing DeFi categories by market share?