Catalysts and Fundamentals for the Next Bull Run

[RejectedBanana]

Redirecting from another thread, I thought this a worthy topic for discussion all on its own:

What could be another catalyst for a new bull-run? Of course there are possibilities like the approval
of a Bitcoin ETF (seems unlikely for now) or the upcoming block reward halving (is still more than 2 years
away) or the Lightning Network. Nevertheless, it still looks like a classic blow-off top, which could
be the indication of yet another prolonged bear market.

The catalyst may very well be random but without key fundamentals in place, the next bull-run may well fizzle out.

What derailed the last bull run and how has Bitcoin's anti-fragile immune system responded?

I think a series of fundamental factors contributed:

1) Transaction fees and network inefficiencies
Segwit adoption (currenty ~40%) and batched transactions have basically "cured" this issue for the time being. Fees are now the lowest in 7 years.
The Lightning Network has since gone mainnet beta with ~2000 nodes, likely curing peak performance issues in the foreseeable future, assuming all the bugs are ironed out and adoption continues to take root.

2) BCash/Coinbase Surprise Insider Attack
This probably acted more as a sell-off catalyst at the time, but Coinbase has since lost a lot of credibility for how they handled the BCash listing. Competition among exchanges may make this issue irrelevant going forward.
BCash remains a threat but the cryptocommunity seems more woke than ever over the scuminess behind Ver, Wu, and Wright.
The fundamental issue concerning block size seems "cured" by #1. ASICBoost/Segwit compatibility remains an issue among miners, but with Segwit adoption and increasing competition in the ASIC industry, this issue will likely fade.

3) Alt/ICO hype/frenzy/scams
Related to #2, Alts and ICOs have definitely muddied the waters. Oldtimers see through the hype but many newcomers are still getting burned. Wall St and Institutional buyers remain unfazed and largely unexposed for the most part. They seem to have their eye on the BTC ball for the time being.
The SEC and further regulation may help to clear the stink, but this a long process, separating the wheat from the chaff.
Most importantly, however, is the rise and promulgation of BTC layer 2/layer 3/sidechain technologies which may very well incorporate all of the hyped features ALTs are promising, making them less and less relevant over time. This includes the offchain transactions (Lightning), smart contracts (Rootstock), atomic swaps and many others I'm probably not aware of. If we look at the dot com boom as an example, there were a lot of hyped, crap companies that completely disappeared once it became clear that Facebook, Apple, Amazon, Netflix, and Google were the clear leaders in Internet adoption. All of these companies absorbed clear winners from the pack, like an amoeba sucking down lunch. And then there were 5. I see and hope for the same thing happening with Alts throwing their lot in with Bitcoin over time.

4) Regulatory uncertainty
This issue is much reviled by many, much appreciated by others, and much needed for Bitcoin to progress as a legitimate asset class. Clear regulatory governance will clear the landing pad for takeoff. China, the US, and Korea are the most anticipated, and all three seem to be embracing Bitcoin going forward, while at the same time trying to limit their citizens exposure to ICO scams. Russia is a mess, with Putin and his oligarchs basically dictating "Do as I say, not as I do." They will try to hoard as much Bitcoin for themselves as possible before allowing any of the common populace to tread on their territory. It will continue to be ugly in dictatorships such as these.
With the US DOJ investigating market manipulation and the SEC being hammered to approve ETFs and the IRS being pressured to provide clear guidance, it is only a matter of time that regulatory measures will take place. In the short term, Bitcoin may take a hit, as the cleansing fires purge the filth. But I think Bitcoin especially will rise from the inferno. Who can argue with immaculate conception? It worked for Jesus. Perhaps Satoshi was his second coming. Blasphemy, pure blasphemy, but hey.

5) Futures Markets
Futures opened the door for shorts. In the short term (haha, punny), futures appear to have done great harm via manipulation and naysayers. But in the long term, futures may provide a much needed stabilization effect to allow BTC to become more than just a store of value, but an actual predictable stable currency. It ain't working now, but then again, how much of an influence is actual vs perceived? Hard to say. But more and more derivatives are on the way, until custody issues relieve some of pressure. Futures markets may also grease the pipe for an eventual ETF.

6) Custody
The Winklvii et al. push harded for an ETF during the last bull run. And the SEC pushed back harder. The primary concern? Custody. Prove to us you can keep Bitcoin safe. Prove to us another Mt Gox won't happen. At the time, there really was no meaningful solution. That is changing now, and fast. Dozens of custody services are popping up and the world's established brokerages and exchanges are getting in on the game. Custody issues are fast falling by the wayside and may even negate the need for hardware wallets once proven. This opens the door wide open not only for ETFs but for trusted institutional investment especially.

So in summary, I think a lot of these issues are well on their way to being ameliorated in the 1-2 year time frame. As markets and speculation are predictive, a bull run may likely precede all of these fundamentals before being completely resolved. Only this time, there are a lot more eyes on the game. I don't think there is any doubt of the potential of Bitcoin anymore, from Wall St to governments and world leaders to financial institutions. At some point the naysayers and those who have more to lose than gain with Bitcoin's rise will not be able to suppress the beast any longer. And they will throw their lot in with the rest of us.

The next bull run will probably be the result of a perfect storm of fundamentals coming together and then set off by some random spark. I don't think the halving alone can provide the spark without these fundamentals in place first. I do think it will precede an ETF, though, because of all the stars that have to line up to make an ETF possible in the first place.

tl;dr: Fundamental issues matter and are largely being resolved. The BTC prize is too big to ignore. Any random spark can be the catalyst. Markets are predictive and the next bull run may happen well before the halving or an ETF are established.

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[Samarkand]

...
1) Transaction fees and network inefficiencies
Segwit adoption (currenty ~40%) and batched transactions have basically "cured" this issue for the time being. Fees are now the lowest in 7 years.
The Lightning Network has since gone mainnet beta with ~2000 nodes, likely curing peak performance issues in the foreseeable future, assuming all the bugs are ironed out and adoption continues to take root.
...

I basically agree with most of your viewpoints except for this claim.

Of course an increase in the adoption of SegWit is a great development, but I really think that the current
level of transaction fees is mainly caused by a loss of interest in Bitcoin (at least for now, many people will
be back).

https://trends.google.com/trends/explore?q=bitcoin

If you take a look at this chart, it looks awfully familiar to the price chart.

If the interest in Bitcoin goes up due to a catalyst, transaction activity will
multiply and fees will rise. Probably the situation won´t be as bad as it
was at the end of 2017 due to SegWit + batched transactions, but I still think
that the current level of transaction fees is unsustainable in the long-term.

Otherwise, a great post and I´m really looking forward to many other good posts in this thread.

[BitcoinNewbie15]

...
1) Transaction fees and network inefficiencies
Segwit adoption (currenty ~40%) and batched transactions have basically "cured" this issue for the time being. Fees are now the lowest in 7 years.
The Lightning Network has since gone mainnet beta with ~2000 nodes, likely curing peak performance issues in the foreseeable future, assuming all the bugs are ironed out and adoption continues to take root.
...

I basically agree with most of your viewpoints except for this claim.

Of course an increase in the adoption of SegWit is a great development, but I really think that the current
level of transaction fees is mainly caused by a loss of interest in Bitcoin (at least for now, many people will
be back).

I think this is only partially true. The High transaction fees did rub some people the wrong way (as it should), but the fees are still the lowest in the last 7 years. So this does conclusively prove that due to segwit and batching, fees are definitely lower. Not necessarily due to loss of interest. Back in 2015/2016 we were seeing close to the same # of transactions that we are seeing now, and fees are way lower.

[exstasie]

If the interest in Bitcoin goes up due to a catalyst, transaction activity will
multiply and fees will rise. Probably the situation won´t be as bad as it
was at the end of 2017 due to SegWit + batched transactions, but I still think
that the current level of transaction fees is unsustainable in the long-term.

This.

I believe there is a correlation between price bubbles and network activity. Limited block size means transaction fees rise with price. Maybe at some extreme level it inhibits price, but I don't see it happening generally. People buying bitcoins as a long term investment or store of value aren't so concerned about fees.

I think people overestimate what a linear block size increase like Segwit accomplishes. Lightning could be useful for consumer transactions, but it won't address long term investors who want coins for storage. And I believe that will remain the primary use case for some time to come.

I expect fees to rise considerably over time, and I'm also very long term bullish.

[Pursuer]

it FIRST needs time. you may think something is positive and can jump start the bull run but if the timing for it is not right, it won't be as effective and may not cause anything more than a small jump.
TIME is needed first for the bear market to end and price to reach a level where majority of investors feel like that is the "bottom" and start buying.

If the interest in Bitcoin goes up due to a catalyst, transaction activity will
multiply and fees will rise. Probably the situation won´t be as bad as it
was at the end of 2017 due to SegWit + batched transactions, but I still think
that the current level of transaction fees is unsustainable in the long-term.

there are two things about fee rise: when it goes up because of more usage and when it goes up because of spam attack.
what we had in most of 2017 was the spam attack and that can happen at any time and under any consensus rules (even the bigger block size) and can make fees ridiculously high.
but the usage one is not a serious problem. whenever there is a big rise or a big fall that can lead to more on chain activity (people buying and moving coins to their wallet while some others move to exchanges to sell) this means more transactions and a slightly bigger backlog and a slightly higher fees.

[figmentofmyass]

it FIRST needs time. you may think something is positive and can jump start the bull run but if the timing for it is not right, it won't be as effective and may not cause anything more than a small jump.
TIME is needed first for the bear market to end and price to reach a level where majority of investors feel like that is the "bottom" and start buying.

bingo. we can go on and on about underlying fundamentals but even under the best conditions, there are larger market forces at play. you don't simply have bubbles without severe corrections. supply must first be exhausted before a bull market can emerge. we haven't had the "boring" phase yet, that period that usually precedes a bull run. that period where everyone has forgotten about, or given up on bitcoin. (remember 2015?)

bounces aside, there's a decent chance we haven't seen the worst of this bear market yet either. as masterluc (probably the best analyst to grace this forum) reminds us:

Why is Bitcoin there? At bitcoin, everything is bad in the mid-term. In the week-long picture, you can see yourself - in the negative zone of the BB, the falling ma20 and everything like that presses from above. Where do we fall? On my previous charts, there is a historical logarithmic support line in the 3-4k area, depending on how to navigate. In the area of ​​2000, we are met by a week-long ma200. I consider the support of this curve to be absolute at this stage. It just can not be pierced.

Bear the wind blows to us from Wall Street. There are very clever guys with big swaps, they are shaking the same button in all markets, including bitcoin. This is an exhaustive explanation of what is happening.

Once again I say bulls sleep at least until the 19 th year.

[TheQuin]

Excellent thread. I pretty much agree with all the points you make.

On number 1, transaction fees, I think we here mostly use Bitcoin on a regular basis so we give a greater importance to it than those solely investing or speculating would.

People buying bitcoins as a long term investment or store of value aren't so concerned about fees.

I agree anyone investing a large amount with a minimum timeframe of 5 to 10 years in mind isn't going to be dissuaded by a $50 tx fee.

I'll move on to 4, 5 and 6 as they are what I see as being the most important. It may not be the next bull run but it will be the big one when it happens. The OP used the phrase "legitimate asset class", I see what they mean but would use 'mainstream asset class' instead. When the regulators are persuaded that not only is Bitcoin a real asset but that the investment banks and the like have proven custody methods to safely store it then we're going to get the biggest influx of money yet.

The opening of futures markets was an important step in that investment managers want to be able to hedge their exposure at certain times without having to actually liquidate the assets. The effect on the market so far is greatly exaggerated. It was a 'buy the rumour, sell the news' trade. All the publicity surrounding it help fuel the market and then when they actually opened it was time to take the profits of that trade.

ETFs aren't that important in themselves but they are an important step in moving the regulators forward. If an ETF provider can convince the SEC they can safely back an ETF with actual Bitcoins then an investment bank has a better chance of convincing them of the same. When that happens then pension funds, investment funds and all the real big money will be able to allocate a percentage of their funds to Bitcoin.

[Samarkand]

...
ETFs aren't that important in themselves but they are an important step in moving the regulators forward. If an ETF provider can convince the SEC they can safely back an ETF with actual Bitcoins then an investment bank has a better chance of convincing them of the same. When that happens then pension funds, investment funds and all the real big money will be able to allocate a percentage of their funds to Bitcoin.

I think ETFs would be a great addition, because they would allow people to allocate parts
of their retirement accounts to a product that is based on Bitcoin and backed by Bitcoin. Right now
doing this is practically impossible in most countries, because these retirement accounts can only
be invested in certain asset classes.
A Bitcoin ETF would be a gateway to include Bitcoin in your retirement portfolio in an indirect way. Besides, it would
obviously fuel a new wave of media interest and good publicity for Bitcoin.

We all witnessed the hype around the BTC futures and I´d argue that the hype around
Bitcoin ETFs would be even bigger.

[followmenot]

This thread is great report on everything about cryptocurrencies. But I believe first 3 titles are more important than others. Last time we saw ath in bitcoin, network became very slow and its worrying for me. Cash is still threatining bitcoin. And altcoins are still muddy/complicated.

[TheQuin]

I think ETFs would be a great addition, because they would allow people to allocate parts
of their retirement accounts to a product that is based on Bitcoin and backed by Bitcoin. Right now
doing this is practically impossible in most countries, because these retirement accounts can only
be invested in certain asset classes.
A Bitcoin ETF would be a gateway to include Bitcoin in your retirement portfolio in an indirect way. Besides, it would
obviously fuel a new wave of media interest and good publicity for Bitcoin.

That's true but the market made up of self-select investment pensions is tiny in comparison to managed pension funds. Think of all the employers with final salary schemes and all the personal pension providers. The trustees of those funds control the real big money that gets invested in Wall St. and The City.

We all witnessed the hype around the BTC futures and I´d argue that the hype around
Bitcoin ETFs would be even bigger.

Absolutely. It looks like the SEC will likely approve leveraged ETFs backed by futures first. These are really only suitable for day trading. It's going to take a bit longer for them approve physically backed investment grade ETFs. That comes back to the custody issue.

[thecodebear]

...
1) Transaction fees and network inefficiencies
Segwit adoption (currenty ~40%) and batched transactions have basically "cured" this issue for the time being. Fees are now the lowest in 7 years.
The Lightning Network has since gone mainnet beta with ~2000 nodes, likely curing peak performance issues in the foreseeable future, assuming all the bugs are ironed out and adoption continues to take root.
...

I basically agree with most of your viewpoints except for this claim.

Of course an increase in the adoption of SegWit is a great development, but I really think that the current
level of transaction fees is mainly caused by a loss of interest in Bitcoin (at least for now, many people will
be back).

https://trends.google.com/trends/explore?q=bitcoin

If you take a look at this chart, it looks awfully familiar to the price chart.

If the interest in Bitcoin goes up due to a catalyst, transaction activity will
multiply and fees will rise. Probably the situation won´t be as bad as it
was at the end of 2017 due to SegWit + batched transactions, but I still think
that the current level of transaction fees is unsustainable in the long-term.

Otherwise, a great post and I´m really looking forward to many other good posts in this thread.

Yeah while Segwit and batching are helping some, the lower interest in Bitcoin right now as compared to during the bull run is definitely playing a big role in the low fees. And fees may be historically low in terms of satoshis per byte, but in terms of raw dollars they're still just like what they were early last year before the bull run started, not at a 7 year low or anything. On the next bull run fees will get just as bad as they were in 2017. Segwit and batching though will obviously help though.

[thecodebear]

I think the next bull run is going to get going from a combination of institutional investors, LN and the beginnings of merchant adoption of LN taking the first steps towards being an alternative to credit cards, and more companies providing easier ways to get Bitcoin whereas last time it was basically Coinbase and that was it.