5 events that could end the current bear market
It’s no secret how exhausting prolonged cryptocurrency market downtrends can be. While most investors try to find the bottom of the current downward trend using technical analysis, there are certain and not so far-fetched events that can completely change the market conditions.
To Report Cointelegraph, currently most cryptocurrency investors are unhappy with the market conditions. A bear market has started a long time ago and relatively few market participants have been spared from the devastating price collapse.
Right now, the hot topic among digital currency industry activists is predicting when the downward trend of the market will change. Most of them want to know how low the price of Bitcoin will go and how long the digital currency winter will last. Meanwhile, more experienced people know that predicting the bottom of the market is almost impossible and that energy is better spent elsewhere.
Instead of focusing on when the downtrend will end, it might be better to understand what can pull the market out of the depths of the downtrend and put it on the path to the next upcycle.
In this article, we are going to examine five potential factors that can pull the digital currency market out of its current bad state.
1. Successfully updated the Ethereum network
One of the events that many investors have been waiting for since five years ago is the transition of the Ethereum network from a proof-of-work mechanism to a proof-of-stake based model.
It should be mentioned that this process has been very long and has faced many problems during this time. However, after the integration process (merging the current proof-of-work network and China Beacon’s proof-of-stake network) was successfully implemented on the Sepolia test and public network, many users concluded that the main integration It is closer than ever.
If the transition goes off without a hitch, there’s a chance that the buzz surrounding it could help the cryptocurrency market break out of its current bearish state. This is even more likely if the integration increases the scalability of the Ethereum network and makes the user experience faster. Currently, the merger is apparently scheduled to take place in August 2022.
If this merger is successful, it may lead traders to adopt a “buy the rumor, sell the news!” strategy. to turn In this case, the prices increase due to the euphoria of the holders; But when the dire financial situation of the world reappears, the market will also fall.
2. Approval of the first Bitcoin Cash ETFs in the US
Another event that has been rumored for years and could revive digital currencies is the licensing of a Bitcoin cash exchange-traded fund (ETF) in the US markets.
The Winklevoss twins proposed the first Bitcoin ETF in 2017, and the US Securities and Exchange Commission rejected it. Since then, every proposal to launch a cash-backed Bitcoin ETF has been rejected one after another.
The US Securities and Exchange Commission’s reason for rejecting a Bitcoin Cash ETF is usually that the digital currency market is easily manipulated and there are no proper policies in place to protect its investors.
If a Bitcoin Cash ETF is approved, the existing long-term litigation will end and Bitcoin and the cryptocurrency industry in general will become more legitimate. This, in turn, makes us face a new wave of adoption of digital currencies among institutional investors. Finally, with new funds pouring into the market, the winter of digital currencies ends.
3. Changing the policies of the US central bank
A common phrase that most investors use all the time is “don’t mess with the Fed.” They use this term to describe one of the most influential forces in global financial markets. Not long ago, the Federal Reserve approved a 0.25 percentage point increase in the bank interest rate, which has been using accommodative monetary policies (increasing the money supply) and near-zero interest rates for years. This figure is also the first interest rate increase in the United States in the last three years.
Since then, the Federal Reserve raised interest rates two more times by 0.5 and 0.75 percentage points, respectively. It should be mentioned that the bank interest rate in America is now in the range of 1.5 to 1.75.
At the same time, the price of risky assets has decreased. For example, Bitcoin has reached its current price (about $20,000) from the level of $48,000 at the end of March (March 1400).
The historical growth of the digital currency market and price jump in 2021 was largely due to the Federal Reserve’s accommodative monetary policies. As a result, if the Federal Reserve reverts to such policies after some time, the flow of capital will once again return to the digital currency ecosystem.
4. Acceptance of Bitcoin as legal tender in different countries
In 2021, El Salvador became the first country in the world to accept Bitcoin as a legal currency for its citizens to use. In April 2022, the Central African Republic (CAR) became the second country to do so and join this growing trend.
It has been a long-standing goal of Bitcoin fans to make this digital currency the legal currency of countries, and the decision of El Salvador and the Central African Republic is commendable, but if we want to be realistic, the adoption of Bitcoin in such small countries will not have much impact.
However, if larger countries like Japan or Germany decide to accept Bitcoin as their legal currency and their citizens use this digital currency for their daily purchases, a fundamental change is likely to happen.
Recent developments in the world, including military conflicts between countries and food shortages, have forced governments to do things they never thought possible. As a result, it is not far-fetched for a major country to use Bitcoin as its last resort; Because fiat currencies are still losing their purchasing power.
5. Acceptance of Bitcoin by a large company
A common excuse as to why people don’t use Bitcoin or cryptocurrencies for their daily purchases is that these currencies are not accepted anywhere.
Obviously, there are many ways to access value in the form of digital currencies. In this context, for example, credit cards and the integration of online payment programs with platforms such as Shopify can be mentioned. However, the possibility of making everyday purchases using direct transactions on a blockchain network is relatively limited.
Elon Musk has repeatedly shown that just talking about payments based on a particular network can cause the token to grow. It should be mentioned that another of his companies, Boring Company, also accepted Dogecoin as a payment method in July.
Based on the experience gained from Musk’s actions, as well as other cases in which the price of a digital currency has increased due to rumors about its acceptance by a large company, it can be said that if large companies such as Amazon or Apple from payments based on digital currencies, a new upward trend may be created in the market.