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Bitcoin’s Bullish Run in 2023: Reasons and Future Potential

Bitcoin’s Turbulent Year in Review

Just under a year ago, turmoil rocked the Bitcoin (BTC) market as nervous investors hastily sold off their holdings. This panic was in response to the collapse of the cryptocurrency exchange FTX.

The 2022 Plunge: A Closer Look

On November 21, 2022, BTC’s price hit its lowest level since late 2020, dropping under $15,500. This marked a 77% pullback from its all-time highs of $69,000 in November 2021.

The Main Catalyst for the 2022 Bear Market

The collapse of FTX was a critical factor in Bitcoin’s decline in 2022. However, the aggressive interest rate hiking cycle initiated by the US Federal Reserve took the market by surprise, making it the primary catalyst behind the bear market.

Bitcoin’s Remarkable Turnaround

Since late 2022, Bitcoin has experienced a remarkable reversal of fortunes. Its current price, just under $35,000, reflects a more than 120% increase from the 2022 lows. The cryptocurrency’s pullback from its 2021 highs has now reduced to approximately 50%.

Challenges in the Macro Landscape

Despite continued strong performance in the US economy and the Federal Reserve’s cautious interest rate hikes in 2023, Bitcoin’s resurgence is notable. Yields on long-term US government bonds are at multi-decade highs.

Three Reasons for Bitcoin’s Strong Recovery in 2023

  1. Mean Reversion: A Historical PerspectiveMean reversion likely played a role in Bitcoin’s 2023 recovery. Various metrics indicated that the market became historically oversold after the FTX implosion. For instance, Glassnode reported that Bitcoin’s Market Value Realized Value (MVRV) Ratio briefly dropped below 0.8 last November, a rare occurrence in the cryptocurrency’s history, signaling a historic buying opportunity.
  2. Dip-buying by Long-term BullsA substantial 40% price increase in Bitcoin in January resulted from dip-buying by high-conviction, long-term Bitcoin enthusiasts. This trend aligns with’s Bitcoin Rainbow Chart, which indicated that BTC’s price had been in a “fire sale” territory for much of late 2022.
  3. Safe Haven Amid Market UncertaintyBitcoin’s impressive performance, alongside gold and bonds during a US bank crisis in March, reinforced the idea that BTC serves as a safe haven in times of financial system instability. Recent geopolitical concerns and a flight to quality amid US regulatory scrutiny have further bolstered Bitcoin’s dominance in the crypto space.

Institutional Adoption and Its Impact

Optimism surrounding institutional adoption surged when major Wall Street asset managers, including BlackRock, filed to create spot Bitcoin ETFs back in June. This sentiment has contributed to the recent rise in the BTC price.

How High Can Bitcoin’s Bull Market Go?

In previous Bitcoin bull markets, the MVRV ratio consistently climbed to extreme levels above 3.2. Currently, an MVRV ratio of 3.2 corresponds to around $65,800. It’s worth noting that Bitcoin’s realized price historically increased during bull markets. For instance, in 2020 to 2021, the realized price rose from around $5,000 to a peak of approximately $25,000.

Assuming the realized price (recently just above $20,000) increases by 5x during the upcoming bull market to around $100,000, achieving an MVRV ratio of 3.2 with a realized price of $100,000 would imply a Bitcoin price exceeding $320,000, nearly 10 times the current levels.

Should Bitcoin reach such levels in 2025 or 2026, it aligns with’s Rainbow Chart categorizing BTC’s price as “maximum bubble territory.” A BTC price of over $300,000 would imply a market cap approaching $6 trillion.

This may seem significant, given Bitcoin’s current market cap of approximately $676 billion. However, the notion that Bitcoin could rival gold as a global reserve asset is gaining mainstream acceptance, with influential figures like BlackRock’s Larry Fink endorsing BTC. The market capitalization of all the world’s gold recently exceeded $13 trillion, making a trillion-dollar market cap for Bitcoin seem less far-fetched.

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