In this article we will talk about the bull run, what it is, and the possible scenarios in which Money On Chain can respond in these circumstances.
In the world of bitcoin and cryptocurrencies, the technology is initially seen as an investment opportunity. As a result, several terms from Wall Street, such as bear market, bull market, buy/sell, market cap, and bull run, are used to describe market conditions.
Recently, analysts have increasingly pointed out that a new Bitcoin bull run is expected in the coming months, after the halving event. This is due, among other things, to the possible repetition of previously observed cycles.
As a brief definition, we can say that a bull run is a period in which the majority of investors are buying, demand exceeds supply, market confidence is high and prices are rising (they can last weeks or months).
In this sense, we often say that Money On Chain can be particularly relevant for long-term investors (hodlers) who believe in the potential of Bitcoin and are willing to hold on to their investments despite short-term market fluctuations.
Money On Chain has many variables to consider, but regarding the performance of BPRO over Bitcoin, in general, there are 3 scenarios to take into account in a bull run:
The proposed scenarios can be said to occur in a vacuum, that is, they are theoretical since the variables taken into account are just that, variables, and are not sustained over time. But they serve to illustrate the behavior of the model and what to expect from it.
If you need more detail about how the model works, you can read the following article Deep Dive into Money On Chain.
In this first scenario, we assume that the issuance of DOC tokens remains in minimum quantities compared to the maximum possible according to the amount of BPRO minted (collateral).
What happens in this scenario is that since there is a lot of collateral compared to the number of DOC tokens minted, the global coverage remains high and because of this the BPRO leverage is at low levels. In this way, the performance of the BPRO (percentage difference in price compared to bitcoin) tends to be lower.
In a bull run, the price of BPRO increases more than bitcoin’s, but gently.
For the second, we assume that the issuance level of DOC tokens is half of the maximum amount.
These conditions mean that the global coverage is lower than scenario 1, although still much higher than the collateral of other stablecoins. This is reflected in the fact that the leverage is greater, leading to an increase in the performance of BPRO compared to Bitcoin.
In a bull run, the price of BPRO will grow faster than in the previous scenario.
In the last case, the issuance of DOC tokens close to the maximum possible (regarding the number of BPRO tokens minted) implies that many DOCs need to be stabilized, so the volatility given to the BPRO is greater. In this way, global coverage decreases because there is less collateral for each DOC so leverage increases.
An eventual bull run will cause the price of BPRO to take off strongly from that of Bitcoin due to the leverage, which will also be reflected in the performance of BPRO.
Early adopters will benefit in the next bull run. Beyond this and the conditions of the protocol, betting a few sats on BPRO before a bull run seems to be a decision that will help you rest better at night.