As the crypto market continues to struggle, a few catalysts could still lead to a new bull market. If these events occur, it could lead to a surge in the price of cryptocurrencies, making them more attractive to investors. In this blog post, we will explore these two events and how they could lead to a new bull market as we approach the fourth quarter of 2022.
On June 30, the Bank for International Settlements (BIS) published a paper outlining what degree of exposure banks should have to cryptocurrency. The paper stated that banks will be allowed to hold up to 1% of reserves in cryptocurrencies. Although it's not stated which cryptocurrencies banks can hold, the paper mentioned those held in ETFs like bitcoin and Ethereum. This may be made up of a variety of coins, however, since BTC and ETH are top of the list, there could be a need for stablecoins for improved liquidity between the conventional system and cryptocurrency.
If this agreement went through we could be seeing a whopping 31 billion USD from the top 15 banks in the world going into cryptocurrencies. The top 15 banks in the world, according to Statista, have tier 1 capital worth around 3.1 trillion dollars in fiat currency. With the current price of BTC at the time of writing, which is around 21708.30 USD, the top 15 banks in the world will be able to purchase around 1,428,025 BTC which comes out to approximately 93% of the current total BTC liquid supply according to chainalysis.com.
You can imagine what the situation could be when every bank in the world begins to adopt the standards set out by the BIS. This would see the price of Bitcoin go up dramatically and the entire cryptocurrency market would rise substantially. There won't be enough Bitcoin to meet this demand based on the current liquid supply. We can only speculate what the price of BTC could be in this scenario, but it's probably a safe bet to suggest that a lot higher.
Ethereum as we know has been having problems with scalability which has resulted in a number of splits. The first of which, “Ethereum Classic” was created when the hard fork did not go according to plan. However, there were also a number of forks between various groups of developers as they tried to solve the issue of scaling.
After a lot of people tried to solve the issue, it seemed like the only consensus was to create version 2 .0 which would add a few new features. The ability to significantly scale Ethereum will enable gas costs to become trivial and allow for the unleashing of enormous volumes of traffic on the network, which will be the biggest transformation. Due to its volume-based burning mechanism, which enables more Ethereum to be burned daily than what is inflated, this will render the majority of competing Ethereum chains useless and also cause Ethereum to become deflationary once more given sufficient volume.
We can predict what impact these two events or catalysts could have on the crypto market over the next few months. When the BIS now allows banks to have exposure to Bitcoin we can expect a major scarcity of BTC in the market which would mean a significantly higher price. This will most likely happen around the time of the Ethereum 2.0 mainnet merge which is stated for September 19. This will mean that 2022 will most certainly experience another bull run.
However, this is not a guarantee and we can expect a downward price further around this period, and not to forget that Mt. Gox BTC hack repayment to owners coming soon, which will result in a lot of volume being sent back into the crypto market, which would subsequently result in a downward price.
We expect this BIS agreement to go through, however, if it is pushed back it would most likely have a negative impact on the price of Bitcoin. It seems unlikely that banks will take action until they are sure that they can achieve an agreement with the exchanges or wallets. It also remains to be seen how fast the BIS is able to achieve this, given they are reportedly working on this for years now. However, if the latest announcement is to be believed, the BIS is actively seeking agreement, then it is likely that they will eventually achieve their goal, which would make it a huge catalyst for the market.