A bull run or a bubble? The standing of the 2024 crypto market

Understanding a crypto bull run

The cryptocurrency market is no stranger to occasional bull cycles or periods of increasing prices, heightened investor confidence, and positive market sentiment. Many crypto investors eagerly await the next chance to profit from a bull run. In the past, the crypto market has also experienced some dramatic bull runs.

Newcomers sometimes struggle with certain terms. To learn more about the bull and bear market, we suggest reading this article: 'What do the terms Bull & Bear market mean?'.

Unlike bear markets, bull runs are associated with increasing prices and volatility which amounts to opportunities for investors to buy assets at a lower price and sell high in the short term.  

Positive market sentiment rules the market, resulting in investors buying a lot of digital assets. Such a strong demand raises the prices of the assets. 

In traditional financial markets, a bull market refers to an extended period during which the prices of stocks or other types of securities rise by at least 20%.  

The term bull market is frequently used in the stock exchange market, but it can also refer to other assets, such as cryptocurrency or real estate. 

Understanding the bull market phase is essential for investors, and how to differentiate it from a bubble.

Keep in mind that nothing in this article is intended as or shall be understood as financial advice. When dealing with financial markets, either traditional or crypto, it is important to demonstrate a high level of financial responsibility and do your research as well as consult a professional. 

Signs of a crypto bull market

Similar to traditional markets, a bull market in cryptocurrency is featured by a sustained upward trend in the prices of digital assets. During this market phase, investor confidence rises which leads to a surge in buying activity, along with a positive outlook ruling the entire market.

So, what are the signs of a bull market in the cryptocurrency world? There are several factors you should be aware of.

The first one refers to increasing prices. This is the most obvious sign of a bull run. An extended increase in prices of digital assets across the entire market means that the bull phase is here. Typically, Bitcoin tends to lead the charge in crypto bull runs. 

The second sign is a rise in trading volume. With investors and crypto enthusiasts becoming more positive and confident, they trade more crypto assets which amounts to an increase in trading volumes on crypto exchanges. 

The third sign refers to positive market sentiment. There is a general sense that the value of cryptocurrencies is rising. Along with a rising positive outlook, market capitalization goes up as well. 

Further, the onboarding of new investors and users into the crypto ecosystem can also be considered a bullish sign, along with cryptocurrencies achieving new all-time highs. 

Finally, signs of a bullish outlook can also be spotted in technological development and innovation. Development activity is increased, and more projects are created within the crypto space. 

While these are all signs any newcomer should be aware of, more experienced traders and investors are often looking at technical indicators and conducting the required analysis to spot the bullish cycle. 

How to define a bull cycle in the cryptocurrency market?

While bull runs in traditional markets are often linked to positive market conditions and economic development, the crypto market can also go through bull cycles during times of financial uncertainty. 

The reason behind this lies in the crypto assets' decentralised nature; since cryptocurrencies are not linked to a central authority or a specific jurisdiction, as are assets in the traditional market, they can function independently and set out their own market trends and dynamics. 

Finally, technological innovations are a significant aspect of the crypto bull market phase. The underlying blockchain technology is expanding to many industries, and this can cause changes on crypto markets.

Investors that realise the importance of blockchain technology can invest their funds into projects they believe could be beneficial to sectors such as healthcare, supply chain management, education, or finance. 

Therefore, to define a bull cycle in the crypto market and reach your investment goals, you should be aware of these unique features of crypto bull runs.

Crypto bull runs in the past

The crypto bull runs have often coincided with Bitcoin halving events every four years- when the Bitcoin reward for miners gets cut in half. The next crypto bull run is typically forecasted based on historical patterns and Bitcoin halving events.

If you wonder why the 2024 Bitcoin halving event differs from past halving events, we suggest reading this article: 'Bitcoin halving 2024 is different: Here's why'.

Since the inception of Bitcoin back in 2008, there have been some considerable crypto bull runs. Let’s explain them briefly. 

One year after its inception, Bitcoin was worth $0, but managed to cross $1 in the beginning of 2011 and increased to $31 by June. This bull run lasted approximately 2 years. 

The second bull cycle started in 2012 with Bitcoin rising to around $1,163 in November 2013. 

The beginning of the third bull run started in the last quarter of 2015 after Bitcoin hit a new low of around $200, and increased to $19,783 in December 2017. 

The next bull run happened in March 2020 with Bitcoin’s price being around $5000. With the involvement of the Covid-19 pandemic and the onboarding of novel institutional and retail investors, the price of Bitcoin rose to approximately $65,000 in April 2021. 

The 2024 Bitcoin halving event brought a new positive outlook in the crypto market in 2023. With the approval of spot Bitcoin ETFs at the beginning of 2024 as well as several macroeconomic elements and increasing liquidity of stablecoins, it is believed that we might be going through another crypto bull run. 

Did ETFs help crypto adoption? To find out the answer, take a look at this article: 'Are Bitcoin ETFs the key to the mass adoption of crypto?'.

What are the key takeaways from these historical patterns?  

First, Bitcoin has experienced dramatic bull runs approximately every 4 years with bull runs peaking within 12 to 18 months. Bitcoin bull run peaks have been followed by broad market corrections as the prices fell dramatically over the period of 1 to 2 years. 

As the next Bitcoin halving event happens, it is forecasted that a bull run will accelerate in 2024 and peak in late 2025. 

However, investors tend to make a lot of mistakes and go into frenzy mode during alleged bull runs. Overinvesting and being overwhelmed by the fear of missing out can amount to losing funds instead of taking advantage of this market phase. That is why you need to learn how to tell apart crypto bull runs from crypto bubbles.

Into the 2024 crypto bull market

At the time of writing, Bitcoin has reached a new all-time high. Driven by the outcome of the U.S. presidential elections, Bitcoin is currently trading above $82,000, with a positive sentiment prevailing in the market. 

As mentioned above, crypto bull runs typically start with an upward trend of digital assets’ prices following Bitcoin reaching an all-time high. After a halving event, Bitcoin and other cryptocurrencies tend to move to their current maximum potential. At least, historical patterns told us that.  

Bitcoin assumed a position as a leader in the cryptocurrency market, and its price movement presents a domino effect that often dominates the general sentiment and market trends of digital currencies. For now, we know that the Bitcoin price surged in 2024 and pushed the pace of the global economy.

Key factors shaping the next crypto bull run

There are several elements that can influence the next crypto bull run. Investors should be aware of these elements and adapt their risk management and investment strategy accordingly. 

One of the cornerstones of the crypto bull market refers to technology. As an industry that was at the forefront of innovation from its inception, new developments typically knock on the door as the bull run approaches. Therefore, it is wise to keep track of new technological advancements within the crypto world. 

We have already pointed out several times that innovation is not the only factor and that multiple elements need to be considered when determining the possibility of a next crypto bull run. The crypto market is always influenced by macroeconomic events and regulatory changes, and it is recommended to stay updated on crypto regulatory news as well. 

Other indicators need to be considered to determine whether we are in a bull cycle, such as the total market capitalization and the price movements of altcoins.

Bitcoin halvings typically precede market rallies, as determined by historical events. However, a post-halving bubble is also possible. So, let's learn a thing or two about bubbles.

Education is essential in the crypto space. To learn more about cryptocurrencies, trading, crypto regulations, risk management strategies, or economics within the crypto landscape, take a look at available courses at our Learn Crypto Academy.

What is a crypto bubble?

The term bubble stems from traditional finance and refers to an economic cycle featuring a quick escalation of market value and asset prices. The escalation is followed by a rapid decrease in value, sometimes referred to as a bubble burst or crash. 

Some experts even deny the occurrence of bubbles, stating that all asset prices often deviate from their intrinsic value. On the other hand, bubbles are typically only determined and studied in retrospect, following a massive drop in prices. 

The main thing about bubbles in financial markets is that they happen by a big surge in asset prices which don’t align with the fundamentals of the asset and their intrinsic values. 

The same can happen in the crypto world; a crypto bubble refers to a rapid rise of cryptocurrency prices, mainly due to speculation or hype on the market, rather than because of the real value of the asset and the underlying technology.  

Imagine a balloon being inflated until it can’t hold any more air. When the balloon finally bursts, the prices driven by hype decrease rapidly and the market corrects itself.

What is an echo bubble?

After large bubble bursts, a smaller bubble may emerge. It refers to a follow-on price bubble that happens after big bursts. Within the sphere of traditional finance, echo bubbles were first demonstrated in economic experiments but also documented in several historic bubbles on the market. 

An echo bubble happens when asset prices undergo a temporary rally before the market correction has run its course. It can be observed during a dead cat bounce. As the saying goes, even a dead cat will bounce if you drop it from high enough. 

A dead cat bounce refers to the financial activity of a particular asset that goes through a brief price recovery following a long downward trend. To learn more about this chart pattern in traditional and crypto trading, why not read this article: 'What is a dead cat bounce in crypto trading?'.

The concept of echo bubbles was popularised in the crypto context by the trader GCR. The echo bubble theory points out that a smaller bubble follows the burst of a bigger one, as observed in 2019 following a 2017 massive rally in the crypto space.

Why do bubbles happen?

Crypto bubbles, like traditional bubbles, are created by a combination of elements that drive quick price increases beyond their sustainable levels. 

FOMO, the Fear of Missing Out, combined with new investors drawn by stories of overnight success, can create a cycle where rising demand and prices attract more buyers and inflate the bubble. 

Media hype also amounts to the inflation of bubbles. When media reports on surging prices, it creates a widespread interest which again results in FOMO and the bandwagon effect. In other words, social conduct can influence financial decisions. 

In the digital age, the power of social media cannot be overlooked. Since this space spreads information quickly, that is often unverified, a frenzy outlook on the market can happen. The influence of social media platforms cannot be understated. Then we were back at FOMO and the bandwagon effect. 

Now that the balloon is being further inflated, the availability of high leverage enables traders and investors to bet on price movements. Although this can increase gains, there is also a risk that the market could rapidly correct itself. 

How to recognise a bubble?

Identifying a crypto bubble is tough and mainly can be done only when the burst happens, but there are some red flags to be aware of. 

When asset prices surge rapidly without a valid reason, it can be a sign that a bubble is forming. This type of growth is usually driven by hype and speculation rather than other reasons. Increased media coverage amounts to hype, especially when it comes to news about people making big profits out of the blue.  

Other red flags amount to a sudden spike in trading volume. When buying and selling activities go up quickly, it can signify a rise in speculative activities or the frenzy behaviour of investors. 

When the crypto market sentiment is driven by greed, prices tend to fluctuate broadly within short periods. In bubbles, dramatic price swings tend to be more common. While the crypto market is typically associated with volatility, extreme volatility is a red flag.

Crypto bubbles in the past

The volatile and speculative nature of the crypto market amounted to the formation of several bubbles throughout the years. While Bitcoin has demonstrated resilience despite experiencing multiple bubbles in the past, some assets’ prices decreased to zero after the rapid downturn. Let’s look at crypto’s most popular bubbles. 

Bitcoin bubbles

The first cryptocurrency has had its share of bubbles since its inception. For example, in November 2013 Bitcoin's price reached $1,127, driven by growing interest and speculation with the addition of significant media coverage. Over the next year, Bitcoin hit a low of $172 due to market corrections and regulatory concerns.

One of the most popular Bitcoin bubbles happened back in 2017 when Bitcoin’s price increased to approximately $20,000 only to go down to around $3000 in a year.  

The surge was probably driven by widespread media coverage, the rise of Initial Coin Offerings, and interest expressed by institutional investors. The burst in 2018 was exacerbated by ICO failures, regulatory developments, and certain security breaches.

The Terra (LUNA) crash

Back in May 2022, the crash of the Terra network signified the introduction of a crypto winter and caused Bitcoin to go down approximately 60% from its peak in 2021. 

The Terra network revolved around the terraUSD (UST) stablecoin, set to maintain a $1 peg, and LUNA, its sister coin with the purpose to stabilise UST’s value. 

As the algorithmic stablecoin model underpinning UST turned out to be unsustainable, a collapse happened. To find out more about this event, check out this article: 'When Terra broke crypto: The LUNA UST crash explained'.

The 2022 Crypto Winter

When Bitcoin reached at the end of 2021 an all-time high of approximately $69,000, it faced a big decline. Something that was thought to be a usual market correction, transformed into a broad downturn, influenced by Terra's collapse.

In only 6 months, Bitcoin's value went down to approximately $19,000 which represented one of the biggest downturns in the history of finance. As mentioned by the Bank of America, this was the 5th largest financial wipeout on record.

The 2022 Crypto Winter didn't just harm Bitcoin but the entire cryptocurrency space. Many altcoins, even major crypto assets such as Ethereum, lost more than 50% of their value. The extensive nature of the Crypto Winter demonstrated the crypto market's vulnerability to sudden shocks.

Is the 2024 crypto market in a bubble or a bull run?

Since bubbles are mainly determined in retrospect, after the burst has already happened, it is suggested to always stay on your toes and look for signs. There are several analysts within the crypto ecosystem who think the long-held belief in the crypto market's predictable four-year cycle, characterised by phases of accumulation, uptrend, distribution, and downtrend, should be questioned.

For example, analysts pointed out that the introduction of spot Bitcoin ETFs and the increased use of leverage brought to the table new market trends and complexities. These instruments have allegedly changed the capital flow within the crypto market and amounted to a less predictable and more fragmented landscape.

On the other hand, it is not clear yet whether a crypto bull run is on the rise or a bubble, but several experts stated that, while the market appears to be in a crypto bull run with volatile prices, some other bubble indicators such as rush of investors or sudden price jumps are missing.

Is a bull in the eye of the beholder?

In 2024 Bitcoin is reaching another all-time high, crypto projects are growing, and technological innovations and new use cases are just around the corner. This sounds pretty much like a crypto bull market atmosphere. However, many experts tell us to be cautious- this might be on until everyone is feeling the excitement. 

Therefore, investors should be cautious and examine market dynamics and behaviour as well as volatility trends and liquidity. Whether it is a crypto bull run or if there is a possibility of a bubble risk, investors should always do their research and prepare for potential market adjustments.