What Will Drive the Next Crypto Bull Run?

Despite the air of despondency that has blanketed the crypto space for the last several months, there has not so far been anything this cycle to signal a major departure from previous trends.

Up to now, bitcoin, dragging the altcoin rabble in its wake as always, has been following more-or-less the same ups and downs it has traced out in past cycles and which mark the typical shifts in psychology that drive bullish and bearish periods.

In fact, occasional claims that this time is different, are themselves to be expected as part of the pattern, demonstrating that this time is, as things stand, the same.

This is not to say that external factors, monetary or political, are the same as before. You can’t stand in the same river twice. But, those external currents are carrying bitcoin and crypto around familiar channels, and are balanced, perhaps, by the knowable behavioral shifts that provide energy to markets.

Looking ahead from here, we can speculate on where the dynamism will come from to drive the next crypto bull run, which means first reflecting on what drove the previous bull run.

Key Drivers Last Time

The 2020/21 crypto upturn coincided with a period, as governments departed wildly from orthodox pandemic response strategies, of extreme stimulus packages. With cash at hand, populations ordered to stay at home, and a surreal sense that normalcy had been indefinitely suspended, casual investors became prone to act incautiously, and the result was money pouring into Bitcoin and the rest of the crypto space, including NFTs and meme coins such as Shiba Inu.

Essentially, there was a free-for-all, and valuations bubbled through the roof. Not all of this was simply optimistic recklessness, though. In fact, it made sense to take advantage of what was occurring, and if a purported quality of bitcoin is that it can be used to hedge against currency debasement and inflation, then it worked, soaring in price when cash was cheap.

Bitcoin’s subsequent crash is not evidence that doesn’t function as a hedge, but rather that it reacts rapidly but coherently to changes in the wider monetary environment, including both relaxation and tightening.

Speculation around NFTs and, later in 2021, metaverse development were also drivers of interest. Ethereum in particular, positioned to be the foundation upon which web3 and the metaverse will be built, at times appeared to be running on its own distinct narrative, partly uncoupled from Bitcoin’s dominance.

Factors in the Next Bull Run

It’s debatable to what extent the narrative of institutional adoption helped to drive the last bull market, but a critical aspect of the refrain that the institutions are coming is that it appears, in the longer term, to be true.

It’s plausible that this factor will have a more readily apparent influence next time around if moves towards institutional acceptance of bitcoin (and other cryptos) pick up the pace and become impossible to ignore.

Then we have the question of utility, but in this case, Bitcoin’s product/market fit is not obscure: it is money that can be used to transact and save. This is not rocket science, and Bitcoin’s non-judgmental, inclusive and decentralized proposition looks increasingly inviting when contrasted with recent controversies around PayPal.

In case you missed the story, PayPal last week released an updated user agreement, including a clause stating that it could fine users up to $2,500 per offence if they used PayPal for activities related to promoting misinformation, as determined solely at PayPal's discretion.

The perversity of this policy condition cannot be overstated: we have a financial service provider presuming to be a judge of factual accuracy, claiming the authority to delineate which ideas its users can and cannot express, and assuming the power to issue material punishments.

Even putting aside ethical and legal debates, it’s a public relations catastrophe, and the backlash was cacophonous. PayPal swiftly backtracked, stating that the clause was included in error, but significant damage to its brand and services was already done.

This cannot be dismissed as a fringe corporate spat, with attention snowballing on social media, the former CEO of PayPal, David Marcus weighing in to criticize his former company, and Elon Musk concurring with him.

Marcus, fittingly, is currently the CEO of Lightspark, a company focused on Bitcoin utility, and it is Bitcoin that stands starkly distinct from PayPal’s bafflingly misguided over-reach. Controversies such as this draw attention to the safeguards provided by a truly neutral payment method that is unhooked from central authorities.

Finally, another narrative set to drive crypto participation in the coming years is that around web3, which relates in particular to Ethereum. Web3 is where crypto crosses over with mainstream, non-financial sectors such as art, fashion, gaming, web development and AR/VR.

Covering such a diverse range of subject areas, web3 development has an added sheen of respectability and might have the capacity to pull in new participants who are not otherwise interested in cryptocurrencies, onboarding them in novel ways.

Up to now, it has been Bitcoin that led the way, while the rest of crypto followed. Perhaps, in the next cycle, Ethereum will pull away to create its own, web3-focused momentum, while separately, the case in favor of Bitcoin grows ever stronger.