Is this a bear market rally, or the start of a new bull market?

Opinion Article by CryptoJelleNL

With the halving less than 170 days away, crypto Twitter and trading forums are filled with debates on whether we are in the first inning of the next bull market cycle, or if we are still in the heights of a bear market rally. In today's article, we discuss the arguments for both opinions before diving into why I believe the bull market is already firing up.

The Bearish Case

It's been 8 months since CoinMarketCap published an article of mine, where I compared 2019's Bitcoin chart to February of this year. The chart below (sourced from that same article) shows the similarities between the two charts.

In this article, I made the case for a bear market rally, with a final target of $30,000. That target has since been reached, and we have been consolidating between $30,000 and $25,000 ever since.

Because of that apparent lack of a stronger sell-off after the bear market rally, many traders are still waiting for it to come, most of them targeting prices of around $19,000 – or slightly above that.

Many traders structure their arguments based on the fact that the previous cycle came with a capitulation event around the outbreak of the COVID-19 pandemic, expecting the cycle to unfold in a similar manner again – but there are technical arguments to be made as well.

For example, X (formerly Twitter) user HornHairs has recently sounded the alarm about Bitcoin potentially re-visiting sub-25k prices in the not-so-distant future. One of his recent tweets shows his mid-term bias: 

• “A failed breakout above September high 
• The previous 500 day shelf acting as resistance now, crucial level 
• Looks like we may need to make a trip lower, sub $25k even”

On the weekly timeframe, Bitcoin also closed below the high of the previous week, following the failed breakout. To add to the list of bearish arguments, the economy still is in reasonably rough shape, wars are plaguing Europe and the Middle East and uncertainty is high. All in all, it makes sense that people are expecting lower prices. 

The Bullish Case

On the flip side, there is a long list of reasons to be bullish as well. The primary argument in favor of the bulls is simple: Bitcoin is widely considered to be a cyclical asset. Periods of bearish price action are followed by bullish price action, and then bearish price action again. The pattern repeats itself, over and over again. 

Directly in line with that cyclical nature; bitcoin's halving event is another major reason why many traders lean bullish. After all, the halving event routinely changes the supply & demand dynamics of the market. The emission of new bitcoin is cut in half which – assuming that demand stays constant or increases – results in an upside. In simple terms, increased scarcity generally means higher prices. 

However, April is still a long time away – so there must be more, right? 

You guessed it! The same argument bears use to build their thesis can also be used in the bullish argument: the economy. Where bears claim the economy is in bad shape, bulls will say that we are on our way to a recovery. Global liquidity conditions are slowly improving, the Federal Reserve is phasing out rate hikes, and governments across the globe are slowly moving towards more expansionary policy again. 

For example, the US government keeps increasing the debt ceiling, while the Bank of England recently unveiled plans to open up a so-called "permanent lending facility for non-banks", and the Chinese government appears to be routinely shipping out stimulus packages to keep the housing market afloat. All of these policy shifts point towards the same end result: more artificial money creation – which happens to be one of the major drivers behind the previous bull cycle. 

Seasonality is another contributing factor in the bullish thesis. You've probably seen the below chart (source: Coinglass) on your timeline numerous times – and for good reason. It shows how October has historically been Bitcoin's best month, and how Q4, in general, tends to bring a strong end to the year, especially after those rare September when the month ends in the green.

And then there is the strongest bull case of them all: BlackRock, Fidelity, and a bunch of multi-billion dollar asset managers have all filed for spot Bitcoin ETFs – and the SEC has to make a final decision by March of 2024.

While previous attempts at Bitcoin ETFs have been unsuccessful, there are now several futures ETFs available on the open market, which paves the way for the approval of spot ETFs as well. In a recent court case between Grayscale and the SEC, judges ruled that the SEC was "arbitrary and capricious" to reject Grayscale spot Bitcoin ETF because (1) the proposed ETF was "materially similar" to the approved futures ETFs, and (2) because the SEC failed to explain "why Grayscale owning bitcoins rather than bitcoin futures affects the CME's ability to detect fraud."

As such, the SEC will need to make a strong case to deny Spot Bitcoin ETFs again, something they'll likely struggle with – especially with the likes of BlackRock breathing down their neck. BlackRock has an impressive track record of getting ETFs approved, winning 575 of their applications, and losing just one.

All in all, the approval of Bitcoin Spot ETFs seems like a matter of time, opening the doors to trillions of dollars in assets under management. Only a marginal share of that capital has to actually make its way into the industry to push prices higher by a wide margin.

Closing thoughts

If I add that entire bullish case together and then look at the below chart – I can only come to one conclusion: the next bull market is right around the corner.

Of course, I could very well be wrong – but I like my odds. I have been preparing for the next cycle for close to a year, and will patiently wait for the halving event and Bitcoin ETF approvals to kick this thing into high gear.

As always, remember that my articles - while based on extensive research – boil down to my interpretation of the data, which is based on my experience and knowledge alone. Do your own due diligence before making any trading decisions, and exercise risk management to prevent unnecessary losses. 

Good luck.

Author's Disclaimer: This article has been written for informational purposes only. It should not be construed as trading or investment advice in any shape or form. 

Editor's note: CryptoJelleNL provides insights into the cryptocurrency industry. He has been actively participating in financial markets for over 5 years, primarily focusing on long-term investments in both the stock market and crypto. While he watches the returns of those investments roll in, he writes articles for multiple platforms. From now on, he will be contributing his insights for WOO as well. 

Check out his twitter: twitter.com/cryptojellenl

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