Is Bitcoin Ready for Another 2021-Style Rally?

Bitcoin has seen a few “perfect storms” where everything lined up just right to push prices to new highs. One of the most memorable runs happened between March 2020 and mid-2021. With the world in lockdown during the COVID-19 crisis, money was cheap, and Bitcoin broke records.

So, could we be on the verge of seeing something like this again?

What Made 2021 So Special for Bitcoin?

According to crypto analyst Miles Deutscher, the 2021 Bitcoin boom was driven by a perfect mix of factors. Central banks were pumping money into the economy, everyone was stuck at home, and generous stimulus checks were hitting bank accounts.

This combination fueled a sharp rise in Bitcoin’s price. But, as we know, every boom has its bust. By November 2021, Bitcoin had hit its peak, and shortly after, the crash began.

The trouble really kicked off in May 2022 when the stablecoin Terra’s UST and its token LUNA collapsed. This event triggered a painful, downward spiral for Bitcoin and the broader market.

https://twitter.com/milesdeutscher/status/1828836166440996873

The Crash Aftermath

After Terra’s downfall, the domino effect took out several major crypto companies, including 3AC, Celsius, BlockFi, Voyager, and FTX. These failures shook investor confidence, especially among small investors who had jumped in during the late stages of the bull run. Many saw their savings disappear, and some exited the market altogether, while others grew increasingly wary of crypto.

Could We See Another Bitcoin Boom?

Despite the tough times and the exit of many small investors, Deutscher sees signs that Bitcoin could be gearing up for another rise. One of the biggest signals is the approval of a Bitcoin spot ETF by BlackRock, the world’s largest asset manager.

Deutscher points out that the ETF approval shows that big, professional players like BlackRock are betting on Bitcoin. This renewed confidence has already helped Bitcoin hit a new all-time high earlier this year.

However, it’s clear that Bitcoin is soaking up much of the new capital, with other cryptocurrencies not seeing the same kind of rise they did in 2021. Deutscher notes that Bitcoin ETFs are drawing funds mainly into Bitcoin, leaving less for the wider market.

What Could Bring Small Investors Back to Bitcoin?

To get small investors excited again, Deutscher believes a few things need to happen. First, Bitcoin hitting a new all-time high could spark renewed interest, just like we’ve seen in previous cycles. This could kickstart a fresh wave of optimism and bring more people back to the market.

At the end of the day, many crypto investors are still speculators. If they see big gains are possible, there’s a good chance they’ll jump back in. But for Bitcoin to sustain this momentum, we need real-world use cases to drive long-term growth.

Deutscher also highlights that the infrastructure around Bitcoin has improved a lot since 2021. This could pave the way for new “killer dApps” (decentralized apps) that could boost Bitcoin’s adoption even further.

While the next bull run might not look exactly like 2021, Deutscher believes there’s still room for big opportunities with Bitcoin. So, as we keep a close eye on the market, it’s clear that Bitcoin’s story is far from over.