Everyone with even a surface-level knowledge of the crypto market will be aware of the great crypto bull run of 2017. Many no-coiners and skeptics also remember the subsequent 2018 crash pretty well. Dubbed as the burst of the Bitcoin Bubble, or even the Great Crypto Crash, the prices of cryptocurrencies fell substantially. Over the year 2018, the cryptocurrency market fell over 80%, making it worse than the infamous Dot-com bubble’s 78% collapse.
This has led everyone to basically treat cryptocurrencies with a grain of salt, only putting in money they’re completely okay with losing (understandable and advisable). However, the motive seems to be to time the market and price speculations instead of HODLing for the long term.
If you’ve followed the 2020-21 bull run, it’s safe to assume that you have one particularly common question in your mind, what’s fundamentally different between the two bull runs that many enthusiasts are pretty sure that this run won’t be met with the same fate? Let’s find out.
Differences Between 2017 Bull Run and the 2020-21 Bull Run
Yes, we understand the heights of 2021 will give many a sense of Deja Vu back to 2017, but the two bull runs have two major differences:
- In 2017, the Crypto ecosystem was at an extremely nascent phase. People invested heavily in scammy ICOs and Pump and dumps, and the reputation of these bad coins triggered an entire market collapse. Now in 2021, though crypto is still in a nascent phase, the market has matured quite a bit. People have begun to understand the differences between coins, added with the growth of Ethereum and the DeFi ecosystem. Even if some investors invested in pump and dumps or other poor coins, there is enough market maturity to not trigger another collapse, on a similar scale.
- Secondly, but much more importantly institutional adoption. The 2017 bull run was mainly powered by retail traders who cannot afford to weather the volatility out for long-run profits nearly as much as the institutional adopters can. However, in 2021, major institutional names like Morgan Stanley, Tesla, PayPal, MicroStrategy adopting and endorsing Bitcoin are an extremely common occurrence now.
How Will Institutional Adoption Affect the Crypto Market?
The significant difference between 2017 and 2021 is the rate of institutional adoption in the present. Large institutions were vocally skeptical and remained aloof in the 2017 run, but now in 2021, we’ve witnessed how Bitcoin’s success can simply not be discredited. If you’re wondering what impact institutional adoption can signify for the immediate future of cryptocurrencies, worry not. For the sake of simplicity, let’s divide the benefits into three major subcategories.
1. Reduced Volatility
Institutional adoption directly plays a major role in reducing volatility. Volatility is infamously notorious in the crypto community, as price hikes and falls of 30% aren’t unheard of. However, with Institutional Traders looking to purchase on the lows, the volatility of crypto is slowly reducing. In time, this will lead to a crypto market with healthy volatility.
2. Significant Long Term Price Benefits
Retail investors, no matter how deep their pockets are, will have to react to market movements, and cannot react to volatility the same way as institutional adopters can. We see companies like Tesla adopting cryptocurrencies for the long run, and not convert to Fiat. This strongly suggests a long-term belief in the ecosystem, and not just riding the wave of the 2020-21 run. This signals that the institutions are prepared to weather short-term volatility for the long run, significantly reducing the likelihood of another crypto crash.
3. Adoption Stimulus
When people see big names and institutions that they believe in, adopt cryptocurrencies, a significant number of people who were previously uninitiated will begin to research cryptocurrencies. Institutional adoptions will also be closely monitored by governments, paving the way for further global adoption.
Keep in mind that despite institutional adoption or the bull run of your lifetime, cryptocurrencies tend to be a pretty volatile asset class. No doubt the institutional adoption will help decrease the volatility, but it can not completely eliminate it. This post attempts to enrich you with the knowledge of the impacts of institutional adoption and should not be misconstrued for investment advice.
You can opt to wet your feet into the crypto world by buying an option or futures contract from Delta Exchange, but make sure to thoroughly understand and be comfortable with risks before investing in any cryptocurrency.