First Signs of a Crypto Market Bull Run

Fiat/stablecoin exchange inflows are steadily rising: While crypto inflows into exchanges are a sign that people are looking to sell their crypto, fiat/stablecoin inflows point to the exact opposite. If more investors are adding their stable reserves and fiat currencies into crypto exchanges, they want to buy more crypto. In order for this market observation to be relevant, one has to observe exchange inflows in large time frames for accuracy.

The media is growing optimist of crypto again: News reflects the people. At the start of a bull run (and during), you start seeing more positive news of financial experts and popular investors making optimistic predictions about Bitcoin and other cryptos, news about more places in the world accepting and adopting digital assets, important regulations being developed and more.

New institutional crypto adoption at play: As the market is suddenly rising at a consistent rate, it’s always helpful to keep an eye on up-and-coming institutional investors and their future plans related to crypto. While retail investors are still the biggest influencers of direct trade flows in the crypto market, institutions hold the most power and influence over the everyday investor.

Other markets have also been doing well: If the global stock markets are doing poorly, there is virtually no way that crypto will be able to enter a bull run on its own. Stock markets ($100 trillion), and derivatives in general ($1 quadrillion), are way larger than crypto ($1.32 trillion). Investors will not feel confident to invest in a small and innovative market like crypto if the traditional ones are not performing well. For now, that is.

There is no denying that the crypto market is going through a bear phase at the moment; since Bitcoin and the global market cap reached their all-time highs back in November of 2021, the ecosystem has been facing a steady downfall over the past few months with yet to provide any signs of consistent recovery.

However, regardless of whether any news outlet or online rumours tell you otherwise, markets always have and always will go through phases. Bull runs can’t and won’t last forever, and the same applies to bear runs. While financial experts and investors always seek to find the tell-tale signs that stocks, crypto, fiat etc may be entering a rough phase, what about the signs that things are looking brighter?
With that in mind, this article provides the first signs you should be on the lookout for that indicate the crypto market may be leaving a bearish trend and entering yet another bull run.

Fiat/stablecoin exchange inflows are steadily rising

While crypto inflows into exchanges are a sign that people are looking to sell their crypto, fiat/stablecoin inflows point to the exact opposite. The rationale is simple; if more investors are adding their stable reserves and fiat currencies into crypto exchanges, they can only be wanting one thing; to buy more crypto. In order for this market observation to be relevant, one has to observe exchange inflows in certain time frames. A higher inflow on day 2 compared to day 1 won’t really mean anything, but consistently rising over a larger period can show great confidence in the market.

So what is the appropriate time frame to choose? There isn’t one really, as it all depends on your goals. If you’re a short-term investor, two consecutive weeks of high exchange inflows may mean the market is setting itself up for a short bull wave. If you are really looking for an entire bull run, then the gap gets longer; two, three, six months - the longer exchange inflows have been steadily rising, the safer it is to assume that the market is turning itself around from its downtrend.

The media is growing optimist of crypto again

Here is a bit of a test for you to try out: go to any three financial outlets you are familiar with and type in the search bar “crypto” or “Bitcoin.” Notice a pattern in the newsfeed? If you are searching this during a bear market, you will definitely notice that most news related to the market is quite negative. It does not mean that these outlets are looking to manipulate it, but simply a reflection of the current sentiment in the world. Financial decisions involve a lot more emotion than most would think, so if investors are feeling pessimistic about a specific market, that tends to reciprocate through news and upcoming decisions.

The same applies the other way around; before a bull run, things are looking quite bright for the crypto market. You start seeing news of financial experts and popular investors making optimistic predictions about Bitcoin and other cryptos, news about more places in the world accepting and adopting digital assets, important regulations being developed and more. Of course, there will always be bad news during good markets and good news during bad markets - bad and good events can happen at any given moment. But the rule still stands; news reflects the people and if the news is growing optimist then perhaps it’s time to pay attention.

New institutional crypto adoption at play

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MicroStrategy founder and CEO Michael Saylor at a Bitcoin Conference.

Source: Financial Times

The years 2020 and 2021 saw the biggest rise in institutional adoption in the history of the crypto market. MicroStrategy, Tesla, Square, JPMorgan, PayPal and more officially entered the crypto space as large investors and platform providers. Although the past two years were historically significant, the pattern will always repeat throughout the emergence of a bull run; when the market is looking attractive and promising to corporations and high-level investors, they feel pressured to hop in and catch up to the race.

Therefore, as the market is suddenly rising at a consistent rate, it’s always helpful to keep an eye on up-and-coming institutional investors and their future plans related to crypto. While retail investors are still the biggest influencers of direct trade flows in the crypto market, institutions hold the most power. They are not only the ones who make major headlines about their interest in crypto, but also provide comfort to other institutions and individual investors that it might be a good time to invest.

Other markets have also been doing well

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It’s an inevitable comparison, but a just one. Although there have been some very rare exceptions, financial markets will always influence one another. If the global stock markets are doing poorly, there is virtually no way that crypto will be able to enter a bull run on its own. Just checking different stock markets right now, during a clear crypto bear run, will show you that there is no sunshine on the stock side; they are currently in a major downturn, especially in tech.

The logic here is simple. Firstly, people and institutions feel encouraged to invest more when markets are doing well, and that includes saving a portion of their inflows to cryptocurrencies. If markets are not performing well, despite the general “accumulate while it’s low” philosophy, fear and uncertainty causes people to hold off on investing for better signs that the market will in fact recover. Secondly, and most importantly for crypto, is about proportions. The entire global crypto market currently holds a total capitalization of approximately $1.32 trillion dollars. The global stock market? Over $100 trillion dollars. And the total derivatives market has a whopping estimate of $1 quadrillion dollars (this number 1,000,000,000,000,000). Therefore, as of 2022, the stock market has generally had a much larger influence on crypto than the other way around. If you’re really looking for the next bull run, then it can’t really happen unless the other financial spheres are also optimistic.



Author: Gate.io Researcher: Victor Bastos
* This article represents only the views of the researcher and does not constitute any investment suggestions.
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