You’ve probably already noticed that even if you’re not interested in cryptocurrencies, the media tends to only talk about Bitcoin for a period of 9 months to 1 year. This period generally coincides with what is called the “bullrun”, or bull market.
About every four years, a very special event occurs in the cryptosphere, the Bitcoin halving. During a halving, miners see their rewards halved. Concretely, they earn half as much Bitcoins for the work they provide. We’re not going to dwell here on what mining is all about here – what’s interesting is that this reduction in income generated by mining tends to reduce production, because mining immediately becomes much less profitable, and it leads indirectly in the weeks which follow to a progressive shortage on the market which causes an explosion of the prices and the beginning of a bull market. This is usually when the price of Bitcoin soars.
An indicator of the start of the bull market
During the first bullrun, the price of Bitcoin soared from just over 10 euros to almost 1000 euros. During the second bulllrun, the price of Bitcoin exceeded the 10,000 euros mark. In the third and final bullrun, it briefly exceeded 55,000 euros.
Halving is now used as an indicator of the start of the bull market. In practice, however, prices do not necessarily soar immediately after this event. Sometimes you even have to wait several months for the market to react. In 2020, the third halving was even followed by a brief drop in the price of Bitcoin often referred to as a Covid crack.
A market that follows its own rules
What is important to know when getting into cryptocurrency is that these bullruns (bull market) and bear market (bear market) rule the market. Better to avoid taking the bandwagon in the middle of a bullrun, otherwise you will lose a few feathers. While prices can soar very quickly for Bitcoin and other cryptocurrencies, they can also crash in a matter of days. There is no clear indication of the collapse of the market. Caution is therefore required. In 2021, the price of Bitcoin thus collapsed by almost half after several months of growth, and this while most analysts believed that prices would continue to rise for a few more months.
As you will have noticed, in this article we are only talking about Bitcoin and not other cryptocurrencies, for the simple reason that the price of Bitcoin tends to heavily influence the market. If the price of Bitcoin collapses, it takes all other cryptocurrencies with it. Conversely, when the bullrun starts, the price of other cryptocurrencies also soars. However, the prices of different assets do not adjust to each other. There will often be lags of several days between the peaks of different cryptocurrencies. As you will have understood, the technical analyst is therefore essential to anticipate market movements.
It should also be noted in passing that although many beginners invest in cryptos in the middle of a bullrun, it is often much more interesting to get started when prices are at their lowest …