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Crypto Market Rally Explained: How Does A Bitcoin Rally Happen?

Author: Jeffrey Craig Date: October 19, 2021

The Market is Rallying!

Stock market investors and cryptocurrency traders are all familiar with the term “rally,” especially in the context of “the market is rallying.” Over the past five years, the markets have seen no shortages of rallies. For example, the winter 2017 crypto rally led by Bitcoin and Ethereum, the stock market rally of 2020 that followed the pandemic crash, and finally, the crypto market rally that started with DeFi summer 2020 and lasted until spring 2021.

When studying the markets it’s important to have a sense of which announcements, fundamentals, “black swans,” and macro factors contribute most to rallies. Doing this will allow investors to choose stocks and cryptocurrencies that are best poised to take off.


What Does A Market Rally Mean?

A Bull Market Rally

A stock market rally is defined as a short period of sustained (or sharp) upward price movements in a stock that are caused by a specific event or announcement. This type of rally is also called a bull market rally, where bullish investors purchase a stock in mass, which as a result causes that stock’s price to increase.

Moreover, a rally isn’t just a 100% valuation increase on Monday that flattens out by Friday, it can also be a steady 5% to 15% rise over a year’s time, or even longer. But more often than not, rallies are characterized by their more drastic price movements in the upward direction, and which look like steep 45-degree angles on the trading charts.

bull market rally

A Bear Market Rally

However, besides the bull market rally, there is also a bear market rally, which occurs when investors start selling a stock, causing its price to decrease.

Examples of Rallies in the Stock Market

In March 2020, when the pandemic was at its outset and uncertainty at its peak, the stock market suffered a 30% crash. However, soon after, when countries began enacting stimulus measures and technology companies doubled down on “digitization,” valuations not only returned to normal, they went through the roof.

global pandemic influences market rallies

In particular, as the graphic shows above, the S&P500 and NASDAQ saw more than decent returns throughout 2020, both notching 14% to 40% gains respectively. Moreover, if you look at the 1-year over charts for these indexes, you can see that their rallies began around March 20th, 2020, but nonetheless ended the year at sustained high levels.

Therefore, even amidst a global pandemic where supply chain disruptions, weak demand, and inflation have plagued the world economy, the stock markets in the US have still continued to net positive returns and hit all-time highs.

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Tesla and Zoom’s Rally

In addition, besides these two indexes, individual tech companies also saw their valuations rally in 2020, outperforming the market by wide margins. For example, if you look at Tesla ($TSLA) and Zoom ($ZOOM), these two stocks saw huge gains throughout the year. Zoom, obviously, saw its valuations soar because of the transition to video conferencing and online work.

Tesla, on the other hand, is a different story. Previously, Tesla was a stock that had been suppressed by the short-sellers and scrutinized by the market bears and doubters. However, once the discussions surrounding EVs started to gain traction, and news following Tesla’s rapid expansion into China hit the mainstream, and everyone realized what this would mean for Tesla’s business, investors changed gears on the stock. As a result, the stock rallied 600% by year’s end.

Bitcoin’s 2020 & 2021 Rally: What started the rally?

Bitcoin is the world’s most popular cryptocurrency and the one with the largest market cap. Therefore, Bitcoin is a perfect example to use, especially since throughout its trading history it has experienced multiple rallies.

For example, by summer 2020 and even to fall/early October, Bitcoin’s price was below $20,000. In hindsight, this is extraordinary, especially given that in subsequent months and by December’s end, it would reach $30,000 per BTC. However, because no one can see into the future, it was impossible to tell this was just the beginning of a massive price rally that would last until May 2021.

The picture above features Bitcoin’s price history throughout 2020 and up to October 2021. BTC experienced two price rallies. One that began in April 2020, and lasted until April 2021, and the other that began in July 2021, and which is ongoing.

BTC experienced two price rallies

Crypto Market Rallies vs. Stock Market Rallies

Cryptocurrency trading/investing is frequently framed as the “Wild West” of finance. Despite volatility and price swings being more notorious, dramatic, and frequent in the cryptocurrency markets, rallies in the upward (and downward) directions are also just as prevalent.

Cryptocurrencies frequently see market gains in the thousands of percentage points. Thus, generally speaking, cryptocurrency rallies are more drastic than their stock market counterparts. For example, the table below, which shows the difference between Bitcoin and Ethereum’s five-year price change in comparison to Apple and Tesla.

Cryptocurrency 5-year return
Bitcoin 16,000%
Ethereum 9,000%
Apple 117%
Tesla 800%


Stock and cryptocurrency bull market rallies are intriguing phenomena. This is because if properly forecasted, they can make a huge difference in one’s portfolio. However, bear market rallies should also be included in this strategic matrix. This is because if traders can determine the potential triggering events, they can better position their investments against downside risk.

All in all, stock market rallies and cryptocurrency rallies share the same DNA. The same factors and announcements that cause stocks to rally and rise also apply to cryptocurrencies.

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