When Will Crypto Go Back Up?

Cryptocurrencies are very volatile financial assets because of their huge price fluctuations and unpredictable market cycles.

In this article, we’ll take a deeper look at the boom-bust nature of crypto and the different types of crypto market cycles and see how long these specific market cycles lasted in the past. This will give you an understanding of why crypto prices are currently down and answer the question: when will crypto go back up?

Crypto Volatility

One of the main factors of uncertainty in the crypto market is the high volatility of digital currencies, which makes crypto a far riskier investment than stocks.

First of all, the crypto market is way smaller than the stock market. The New York Stock Exchange (NYSE) alone is worth 22 trillion US dollars, while the crypto market closed in 2022 with a value just below one trillion USD.

Next, crypto is a relatively new financial asset class that’s barely a decade old, while the first company stocks originate in the 1600s. Because of this, stocks have long since become a dominant financial asset.

Furthermore, most countries have a national stock exchange, and several key global exchanges handle huge portions of global capital, such as NYSE, NASDAQ, and Euronext. 

All this makes company stocks relatively stable assets, whose average annual price change is just a few percent. On the other hand, it’s quite common for crypto prices to fluctuate a few percent or more on a daily basis, especially if you’re dealing with low-cap altcoins.

What’s more, the fact that the crypto market is so small compared to stocks makes it more likely to react to real-world events, such as the bankruptcy of a major exchange like FTX or the crash of a crypto lending company like Celsius.

The crypto bear market of 2022 showed how events such as these can cause a domino effect in the crypto industry and lead to a mass outflow of money from the crypto industry as a result of panic selling.

When BTC and ETH start crashing, the whole market follows because these two cryptos make up more than 50% of the total crypto market capitalization, according to CoinMarketCap. 

In these instances, some traders start buying crypto because they think it’s an excellent opportunity to “buy the dip” and sell when the prices go up, while other traders panic-sell to save at least a portion of their investments in fear of further price drops. The mixed market sentiment further influences the fluctuations of crypto prices.

The Bull Market

The bull market is a term used to describe a condition of the crypto market when prices are jumping, with individual investors, companies, and investment funds pouring cash into crypto.

The name comes from the fact that when bulls attack with their horns, they move upward with their heads. This signifies that the dominant price trend during a bull market run is upward. 

In the crypto market, the so-called “bulls” are the individuals and companies that are optimistic and believe that the price of their crypto assets will grow in the future, so they make large crypto investments.

For example, Bitcoin bulls believe that BTC is digital gold and that its value will exponentially grow in the following years, thanks to its limited maximum supply. Ethereum bulls, on the other hand, believe in ETH’s potential because Ethereum is the largest blockchain ecosystem for launching decentralized apps.

Essentially, bulls are true crypto enthusiasts. When someone is “bullish,” they are extremely confident in the future growth of a specific asset.

During a bull market, crypto investments rapidly rise, and cryptocurrencies reach new all-time highs. This is when venture capitalists and investment firms tend to pour capital into crypto startups and companies.

Bulls exercise buying pressure for specific cryptocurrencies, and when the buying pressure is high, the demand for a particular crypto rises as well. Consequently,  the price of a crypto asset goes up, too. 

The Bear Market

During a bull market, billions of dollars pour into the crypto industry from individual investors and companies alike, thanks to the positive market sentiment. The opposite happens during a bear run when fear and pessimism pervade instead.

The term itself comes from a bear’s downward movement when it strikes to attack with its claws. The main characteristic of a bear cycle is that the total crypto market capitalization rapidly shrinks during this market phase.

The prices of BTC and ETH, as leading cryptocurrencies, rapidly decrease, and these two cryptos drive the rest of the market down. It’s nearly impossible for a large-cap altcoin to witness considerable gains if the market-leading BTC and ETH are down.

Furthermore, the bear market strikes fear into the minds of millions of crypto users and makes them panic-sell their crypto in the hope of saving a portion of their profits. However, this panic-selling drives the crypto market down even further because when most crypto holders sell their assets and cash out into fiat currency, the total crypto market cap decreases. In turn, crypto prices continue crashing. 

Only a sharp reversal in the market sentiment can reverse the situation and turn the market bullish again. This can only happen once the bear market reaches its bottom.

However, no one can say precisely when that’s going to happen. Instead, you should keep an eye on all the factors that influence the market sentiment, especially real-world macroeconomic events like the end of a recession, lower inflation, and the stabilization of central bank interest rates.

As soon as major companies and investors stop selling their cryptos and start buying again, individual investors follow suit, and the market sentiment starts to gradually recover over the next couple of months. 

Crypto Market Cycles

The crypto bear and bull markets are the two main phases of the crypto market. However, there are four more distinct crypto market cycles that can give you better insight into what exactly is happening during the bear and bull markets.

Accumulation

First comes the accumulation phase, during which crypto prices are low, and pessimism dominates the market. In this phase, crypto bears are hesitant to buy new assets because they are uncertain when and whether the price of specific assets will grow.

Bulls, on the other hand, view this phase as a golden opportunity to buy cryptocurrency at a discount. Since the crypto prices are low and the bear market is bottoming out, or the bottom has recently happened, bulls start buying assets they plan to hold until the top of the next bull market.

This phase is also referred to as the consolidation phase because the crypto prices mostly stop falling, and the overall market volatility is quite low. For bears, it might seem that there’s little growth potential during this phase, which can last up to several months. 

Markup

The markup phase is when the bull market is in full effect. The market sentiment is turning positive, the prices of cryptocurrencies are starting to grow, and investors start to invest more fiat currency into crypto once again.

Moreover, companies and investment funds start to pour more cash into digital currencies, boosting the crypto market capitalization and increasing prices.

However, recognizing this phase in its early stages takes a lot of skill. That’s because most investors are still frightened by the recent bear market and are hesitant to invest their money before they witness a clear upward price trend.

The markup phase builds up slowly and peaks, with cryptocurrencies reaching new all-time highs. Many altcoins with strong use cases, numerous decentralized apps, and vibrant communities can do a 10x, 20x, or even 100x during the markup phase.

Investors who bought promising projects during the accumulation phase can experience massive gains at the top of the markup phase. For example, Bitcoin reached a 69,000 USD all-time high during the last bull market in 2021, a tremendous increase from the 2019 low of around 3,600 USD. 

Distribution

Next up is the distribution phase, during which many investors start to sell their crypto to cash out their bull market gains. This creates a new hype around crypto, causing other novice investors to put their money into these assets. The supply and demand ratio for most cryptocurrencies starts evening out, which makes the distribution phase less volatile than the markup period. 

The investor sentiment is sharply divided during the distribution phase because some investors realize that the bull market is ending and sell their crypto for profits, while others hope that the bull market will have additional growth phases.

The latter group of investors continues to buy crypto, but they are too late and eventually suffer losses during the upcoming bear market because they bought too high. These investors can either hold their crypto through the next bear market cycle and hope for higher prices during the next bull market or panic-sell during the bear market and suffer losses. 

Markdown

The markdown phase is when the bear market is in full swing, and prices are massively dropping. Crypto bulls have long since sold their crypto for profits, but late investors are the ones who are in for massive losses if they panic-sell their crypto during the markdown phase.

This phase is when many investors are pessimistic and tend to cash out crypto into fiat currency even if they are at a loss because fear pushes them to think that the crypto market might never recover. It isn’t uncommon for crypto beginners to spread panic that the crypto market is “dead” during the markdown phase.

One of the popular tactics for taking profits during the markdown phase is to short-sell crypto. Shorting refers to using crypto exchanges to bet on the price decrease of a specific cryptocurrency and take profits if the crypto falls in price during a certain period of time.

However, shorting is also unpredictable and risky because, during the markdown phase, cryptocurrencies often have short-term price rallies when the value of a crypto briefly jumps thanks to the buying pressure of crypto bulls. 

Crypto and mainstream media outlets often publish pessimistic headlines regarding the state of the market during the markdown phase. The media boasts of “crypto crashes,” and such news further contributes to fear and pessimistic sentiment among investors who tend to shift their capital to less volatile financial assets such as stocks.

The Role of Global Economic and Political Circumstances in Crypto Market Cycles

Real-world economic circumstances have an important role in crypto market cycles. Although cryptocurrencies are independent of the fiat monetary system in terms of control by banks and centralized financial institutions, economic turmoil still strongly affects the crypto market.

Crypto investors tend to shift toward less volatile financial assets and cash out their crypto in times of economic uncertainty, which is exactly what happened in 2022. In the same year, several countries and regions in the US and the EU introduced crypto laws that put pressure on crypto exchanges and holders alike. 

Furthermore, economic uncertainty pushes investors to take a more conservative approach toward crypto. This means that they invest less and more carefully, using tactics such as dollar cost averaging (DCA), which means that they invest the same amount of money in crypto each week or month. 

This is in sharp contrast with how crypto enthusiasts invest during economically stable periods by stacking up as much crypto as they can in the hope of maximizing their profits.

Past Crypto Market Cycles

Bitcoin, the first cryptocurrency, was launched back in 2009. This means that there haven’t been a lot of bull or bear market cycles in crypto history, but the ones that did happen can still give us some estimates on: when will crypto go back up again?

However, it’s important to note there’s no error-free method to predict how long a crypto bear or bull market will last for sure.

That said, the first crypto bull market lasted from the day Bitcoin was launched up until 2013 when the prices of the early cryptocurrencies started crashing rapidly. The first bear market lasted around 415 days up until 2015. That’s when the next bull market began and continued strong for nearly three years, with several market corrections and crashes.

It’s quite normal for bull markets to experience short-term crash periods when prices start falling but then resume the upward price trend.

Next up, the 2018 bear market lasted roughly one year before the market entered an accumulation phase and the investors’ interest in crypto started rapidly growing. This was the last bull market, lasting over two years.

During this period, both BTC and ETH reached their current all-time highs, along with all of the leading altcoins such as Solana (SOL), Cardano (ADA), Polygon (MATIC), Binance Coin (BNB), Avalanche (AVAX), and other cryptos. 

In May 2022, the market entered its latest bear phase, which saw crypto prices dramatically dropping and the market shrinking from its over two trillion dollar market cap in late 2021 to around 800 billion USD by the end of the year. Although bear markets usually last around one year, there’s no certain way to tell whether the latest bear market is really close to an end. 

Conclusion

Investing in cryptocurrency carries a lot of profitability potential, but it’s also extremely risky because crypto is very unpredictable, and there’s no way to know for sure whether a certain coin will rise or fall in value.

Some projects manage to ride the bull market wave and grow, while others just die out. Likewise, even promising projects sometimes fail to survive the bear market. 

The crypto market cycles described in this guide will help you understand how the crypto market works and what are its key market phases. However, this knowledge won’t help you predict exactly when the bear market will end and when will crypto go back up. 

That’s why it’s best to carefully monitor the market and remember to only invest as much as you’re prepared to lose.