More On-Ramps, Liquidity, Options: Why Bitcoin’s Next Bull Run Will Be Different
Bitcoin’s next bull run will look very different from the last one. In 2017, BTC took the elevator to $20K before following the stairs down to $3K over the course of 12 months. In 2020, as bitcoin prepares for its halvening – followed by another potential price run – the cryptocurrency landscape looks very different. Here’s what’s improved since 2017.
More Fiat Gateways
In 2017, getting funds into crypto called for routing them via dubious banks, paying dearly for the privilege, and often waiting days for the transaction to clear. In 2020, most exchanges have in-built fiat gateways, with new fiat currency options being added on a weekly basis. This week alone, Binance has added another 15 fiat currency pairs after payment processing partner Simplex expanded its fiat on-ramp. Similar ones in place at Bitcoin.com and on exchanges like Kucoin and Bithumb enable investors to purchase crypto using credit or debit card at low cost. As a result, when the retail FOMO begins, enhanced on-ramps will channel more fiat, more efficiently than was the case in 2017.
Better Customer Service
One of the biggest bugbears during 2017’s bull run was the time it took to get verified on exchanges. Users were left waiting weeks for the go-ahead to start trading, as overworked compliance teams battled to clear the backlog. Some, like Bittrex, simply closed their books altogether and refused to accept new registrations. If you ran into technical problems, meanwhile, such as withdrawal issues, you could forget about receiving customer support.
When Circle took over Poloniex in the wake of bitcoin mania, its first task was clearing the backlog of support tickets that had stacked up. In 2020, exchange support still has room to improve, but it’s far more robust than what passed for customer service three years ago. Technical improvements have also kicked in, enabling KYC verification to be completed in minutes rather than days.
Better liquidity means stronger support for bitcoin at key price points. Not only do deeper order books reduce spread and minimize slippage, but they make it harder for whales to single-handedly move the market. That’s not to say that whale shenanigans have been entirely eliminated today, but it’s certainly harder to pull the kind of stunts that were commonplace three years ago. Better liquidity isn’t just about volume, either: it also applies to the number of trading venues where BTC and other cryptocurrencies can be acquired at market price.
When bitcoin embarked on its giddy run in 2017, there weren’t many derivatives options for shorting outside of Bitmex, and nothing at all for institutional investors. CME and Cboe’s futures products launched at the peak of the bubble, and were too late to have any meaningful impact on the market. Today, these institutional options are complemented by a string of derivatives exchanges for retail investors including Binance Futures, FTX, and Deribit. Even Coinbase Pro has belatedly gotten in on the act, introducing margin trading this month. If bitcoin reaches new all-time highs and then keeps on climbing – despite there being efficient ways to short it this time around – it will suggest the rally is steeped in more than simply speculative mania.
Ever since peaking at a median of over $30 in December 2017, BTC fees have been mercifully low, averaging less than 10 sats/byte, and often reaching no more than a couple of sats per byte. Broad adoption of Segwit has also slashed the average transaction size by a third, further reducing costs, and exchanges have gotten more efficient at batching transactions. All this has meant that sending BTC onchain has been affordable for most people and for most amounts above $5.
If bitcoin enters a full-blown bull market, fees can be expected to rise as coins in cold storage are dusted down and sent to exchanges and the mempool fills up. However, if fees can stay affordable for most people, bitcoin should remain attractive to newbs making their first Coinbase buy and sending BTC over to Binance to trade. One thing that is unlikely to be ready by the next bull run is Lightning Network, which is still 18 months off, and may still be in 2140 when the last bitcoins are mined.
There’s one final thing that will be different when bitcoin embarks on its next record-breaking run: many of the investors involved will recall 2017, when a good proportion of them first entered the industry. As bitcoin smashes record after record, they’ll recall those euphoric feelings that, for a few months in 2017, became the norm. This time around, though, will they have the presence of mind to sell while in profit, or will the lessons of three years ago be forgotten as greed takes over? In hindsight, $19K would have been a great place to have sold bitcoin. In the next bull run who’ll have the shrewdness to stop near the top? History suggests virtually no one.
Do you think bitcoin is on the verge of entering another bull market? Let us know in the comments section below.
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