To the dismay of cryptocurrency investors across the ecosystem, the bear market has officially begun and has brought with it a devastating price crash that has left relatively few unscathed.
As the popular topic of conversation now focuses on bearish expectations for how much Bitcoin (BTC) will fall and how long this iteration of the crypto winter will last, those with more experience in this matter know that a bottom is virtually impossible to anticipate. It would be wise to apply those energies elsewhere.
Rather than focusing on the end time, it may be useful to explore events that may help pull the market out of the depths of a bear market and put it on the path of the next bull cycle.
Here is a look at five potential catalysts that could get the cryptocurrency market out of its current predicament.
Successful Ethereum Merge
One of the most anticipated developments in the past five years has been the ongoing transition of the Ethereum network from Proof of Work to Proof of Stake.
While the process has been lengthy and has faced many setbacks, the official switch is now closer than ever after the successful completion of the integration trial on the Sepolia public testnet.
The hype built around the Ethereum consolidation could help pull the crypto market out of its bearish state if the transition occurs without a hitch, especially if it helps increase scalability and a faster user experience. As it stands now, the merger is scheduled for August 2022.
It should be noted that a successful merger could also lead to a “buy the rumor, sell the news” event where prices rise briefly due to the euphoria of crypto holders, only to fall back once the dire state of the global finances. The system returns to the interface.
Bitcoin Instant ETF Approval
Another event that has been rumored for years that could lead to a cryptocurrency revival is the passage of the ETF to the US markets.
Since 2017, when the first BTC ETF proposed by the Winklevoss twins was rejected by the US Securities and Exchange Commission (SEC), there has been one rejection after another of any financially backed Bitcoin ETF proposal that has been put forward.
Reasons for rejection usually revolve around the charge that the cryptocurrency markets are easy to manipulate and the lack of proper safeguards to protect investors.
If the ETF is approved immediately, it will make this long-standing objection moot and bring a new level of legitimacy to Bitcoin and the crypto asset class as a whole. This has the potential to usher in a new wave of institutional adoption that could bring the crypto winter to an end with new money pouring into the market.
The Federal Reserve reverses course
“Don’t fight the Fed” is a common expression used by investors to explain one of the most influential forces in global financial markets. After several years of easy money policies and near-zero interest rates, the US Federal Reserve approved a 0.25% rate hike, the first rate increase in more than three years.
Since then, the Fed has raised interest rates two more times, by 0.5% and 0.75%, bringing the current benchmark interest rate to a range of 1.5% to 1.75%.
Over the same time period, the price of risky assets has plummeted across the globe, with bitcoin dropping from $48,000 at the end of March to its current price, which is trading near the $20,000 support.
The historic rally in cryptocurrency and legacy markets that we saw in 2021 was largely driven by the Federal Reserve’s easy money policies, and it is very likely that a return to such policies will once again lead to an influx of funds into the cryptocurrency ecosystem.
Big adoption of bitcoin as legal tender
2021 saw El Salvador become the first country in the world to adopt bitcoin as a legal currency for its citizens to use. In April of 2022, the Central African Republic became the second country to do so, indicating a growing trend.
While the use of BTC as a legal tender form has been a long-standing goal of crypto proponents and decisions made by El Salvador and the Central African Republic are worth celebrating, its adoption by these small players on the global stage has done little to promote more mainstream. Acceptance.