market

Bull run could be close if regulation allows it

Bitcoin has failed to break the US$25k price resistance, but a historical cyclical pattern could lead to the next bull run

February 20, 2023 - Bitcoin failed to overcome the US$25k price level over the weekend, when there is low liquidity. Indeed, this resistance level has been hard for Bitcoin prices to break, and new rejections could give room for a pullback to US$22k. A negative reading from FOMC’s minutes on Wed could trigger a sentiment reversal, confirming a price correction. Although we have been less concerned about macro data since the disappointing January US inflation data release causing no harm to the market, we concede that the combination of a still hawkish speech from the Fed and mixed technical signals could excite the bears.

In a long term perspective, Bitcoin seems to be repeating a historical cyclical pattern of 33-35 months of bun runs, followed by 14 months of bear markets, which has been occurring since 2014. Therefore, if this bear market has already ended, we could hope for a new bull market to start sooner rather than later. On top of that, the increasing number of digital collectibles using the Bitcoin blockchain through the Ordinals protocol could be one of those early bull market triggers, which may address a latent demand from users boosting activity and prices, in our view.

Meanwhile, the regulatory debate remains a hot topic in the crypto industry. SEC Commissioner Hester Peirce said in an interview to The Block that there will be a struggle to figure out how to productively regulate crypto. She also mentioned that the agency is attempting to impose itself as the crypto market regulator, while Congress is still mulling which agency will be it. Pierce has been a divergent voice in the SEC, seeing the agency’s approach as a very unimaginative form of investor protection. We see a severe regulation as one of the main risks for the next bull market materialized in 2023.

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