Three Signs That May Point to a New Crypto Bull Run

Key Insights:

• Unlike many bear markets, the crypto bear market came unannounced.
• In recent weeks, however, signs are emerging of a possible trend reversal and the beginnings of a crypto bull run.
• Three headwinds plaguing the crypto market since late 2021 appear to be dissipating.

Unlike most bear markets, the crypto bear market came largely unannounced. On November 10, 2021, bitcoin (BTC) struck an all-time high of $68,979, coinciding with the total market cap all-time high of $3,009 billion.

Sentiment across the crypto market was bullish, as was the case across the global equity markets. The NASDAQ 100 struck highs of $16,764.85 on November 22, 2021, shortly after the beginnings of the crypto winter.

From the November 10 ATH high of $68,979, BTC tumbled 74.5% to a June 18 and 2022 low of $17,601. The total crypto market cap fell to a June 18 and 2022 low of $762.83 billion.

However, since June 18, bitcoin and the broader market found a comfort zone, despite the crypto market facing numerous headwinds. Headwinds included the fears of a US economic recession, Fed monetary policy, and a likely shift in the crypto regulatory landscape.

In recent weeks, several signs are pointing to a possible bottoming out and the beginnings of a crypto bull run.

Signs of a New Crypto Bull Run Are Flashing Green

The several signs pointing to a possible bottoming out and the beginnings of a crypto bull run include macroeconomic data, monetary policy, and technical indicators.

Macroeconomics

When considering the macroeconomic component, the crypto market has closely tracked the NASDAQ 100 throughout 2022.

Fears of a US economic recession contributed to the bearish trends seen across the crypto market and the NASDAQ 100. In July, the Fed appeared mindful of the economic headwinds, delivering a ‘dovish’ 75-basis point rate hike. While the US economy contracted in the second quarter, recent economic indicators suggest a possible return to growth.

Two key indicators that have delivered hope included US non-farm payrolls and ISM Non-Manufacturing PMI numbers. However, the better-than-expected numbers raised the prospects of a more aggressive Fed interest rate path to bring inflation back to target.

The Federal Reserve Holds the Cards for Crypto Investors

For riskier assets, the missing piece of the jigsaw, from a macroeconomic perspective, was clear evidence of inflation topping out. On Wednesday, US inflationary pressures softened from 9.1% to 8.5%. While still well above the Fed target, the softer numbers mean that the Fed is under less pressure to deliver another 75-basis point hike that could cripple the economy and sink riskier assets.

With the recent downward trend in crude oil prices, the markets are betting on inflation to soften further in the near term. A sense of calm over the US economic outlook and easing market jitters over another 75-basis point rate hike have been behind the shift in investor sentiment.

The SEC, Cryptos, and the SEC v Ripple Case

There is even hope for investors grappling with the possibility of the digital asset space falling under the authority of the SEC. The third and final piece of the jigsaw is chatter on Capitol Hill that favors the Commodity, Futures, and Trading Commission (CFTC) to oversee the digital asset space.

Taking all three components, which contributed to the broader crypto market collapse, the storm clouds appear to be parting. Wednesday was pivotal and may be the catalyst to a crypto bull run. However, investors need to be mindful of what lies ahead.

The Bull Run Curve Balls

From a monetary policy perspective, the Fed has another round of economic indicators to digest before the September FOMC meeting. Weak data and a spike in inflation could unravel the bullish sentiment. Worse yet, upbeat data and a spike in inflation could force the Fed to deliver a percentage point hike.

From a regulatory perspective, the SEC is in a prolonged battle with Ripple. An SEC victory, however unlikely, could give the SEC the authoritative powers to regulate the crypto space. Investors will hope that lawmakers tackle the SEC’s approach to the digital asset space that strangles innovation.

Technical Indicators Are Turning Bullish, Hinting at the Start of a Bull Run

For the technically minded, the BTC 4-hourly chart and EMAs are sending bullish signals.

In response to the US CPI numbers, BTC broke through the 200-day, 100-day, and 50-day EMAs within a single session and currently holds well above the 50-day EMA ($23,442).

While we have previously seen failed breakouts, the US economic indicators support an extended run.

If the storm clouds are parting and the crypto winter is thawing, BTC will need to break out from $25,000 and target $30,000 to convince investors still wary after the crypto crash of 2022 that took numerous exchanges down and others to the brink of bankruptcy.