The State of Bitcoin: Understanding the Upcoming Market Shift

Bitcoin is approaching another critical inflection point, and while the crypto landscape feels quiet and uneventful, this time is no different.

As we enter Q4, concerns are shifting from inflation to economic growth. This is why markets are closely watching job reports, housing data, manufacturing, and consumer spending to assess the broader economy’s health. But instead of focusing on short-term market signals, we need to zoom out and understand Bitcoin’s long-term trajectory by analyzing its performance through various reference points: halvings, cycle bottoms, and peaks.

In this post, I’ll break down Bitcoin’s Return on Investment (ROI) from these key points and highlight two pivotal events that are set to shape Bitcoin’s future in the coming months.

1. Bitcoin’s Cyclical Nature: Business as Usual?

To assess if Bitcoin is deviating from its usual pattern, let’s examine the data. By calculating Bitcoin’s daily ROI from reference points like halvings, cycle bottoms, and peaks, we can gauge whether its current trajectory is cause for concern—or reassurance.

The first chart below illustrates Bitcoin’s performance between cycle bottoms. It compares the ROI by dividing Bitcoin’s daily price by its lowest value during the last bear market. Here, you’ll notice that the daily ROI from the current cycle (lilac line) is closely aligned with the previous two cycles. The first two cycles were more explosive due to Bitcoin introducing itself as a young asset class.

2. Bitcoin ROI from Cycle Peaks: Ahead of the Curve

Now, let’s examine Bitcoin’s ROI measured from each cycle’s peak. Do better understand what this graph shows, imagine buying Bitcoin at its all-time high in November 2021 and tracking your investment performance since then. This chart shows Bitcoin is doin better compared to the previous cycle peaks of December 2017 and December 2013. Simply put, Bitcoin’s current cycle is progressing well, with no signs of deviation that should raise alarm.

3. The Halving Factor: A Unique Cycle

The third chart shows Bitcoin’s ROI since the last halving. While Bitcoin is underperforming compared to previous halving cycles, this isn’t cause for concern. The 2024 halving is unique due to the introduction of Bitcoin spot ETFs in the U.S. and significant institutional interest from companies like BlackRock and Fidelity. This led to Bitcoin reaching an all-time high before the April 2024 halving—an anomaly not seen in prior cycles, where all-time highs typically occur 12-16 months after halvings.

4. Tracking Bitcoin’s Power Law ‘Fair Value’

One final metric worth highlighting is Bitcoin’s deviation from its power law “fair value.” This is a simple yet powerful way to assess where we are in the cycle and if we’ve hit a potential cycle top. Historically, when Bitcoin surpasses its power law fair value by over 75%, it signals a bubble. In this cycle, however, Bitcoin barely moved above its fair value in March, indicating there’s still plenty of room for growth.

5. Key Events to Watch in Q4 2024: U.S. Elections & Quantitative Easing

Now, let’s move on to two major events on the horizon: the U.S. elections and global quantitative easing. Both could have significant implications for Bitcoin’s price.

The U.S. Election Impact

The U.S. presidential election in November 2024 is another key event to watch. Regardless of the outcome, election years have historically provided a strong boost to Bitcoin’s performance. Since 2012, Bitcoin has consistently surged between 100-300% during Q4 of election years. If this pattern holds, we could see significant gains as we head toward the end of 2024. That is why you may have heard some analysts say that Bitcoin could double at the end of Q4 this year.

Global Quantitative Easing

The second important event is the global shift toward quantitative easing (QE), which has already begun in several countries. In the U.S., the Federal Reserve is expected to cut rates on September 18, 2024, marking a pivot from over two years of quantitative tightening to an approach focused on stimulating economic growth. Central banks worldwide are expected to engage in QE by purchasing long-term securities, increasing the money supply, lowering interest rates, and spurring economic activity. This influx of liquidity generally drives asset prices higher, with Bitcoin poised to benefit as investors seek better returns in a low-interest-rate environment. So, when you see the yellow line in the graph below rise substantially, it’s often a signal that riskier assets, like Bitcoin, are about to gain momentum.

6. The Road Ahead: Bitcoin Dominance & the Next Bull Run

The current bull run has been led by Bitcoin, which makes sense in an environment of tight economic conditions where investors seek the least risky assets. As we move into 2025, I expect Bitcoin dominance to decline, giving way to altcoins. When the market shifts into risk-on mode, lower-cap altcoins—riskier but with higher potential returns—tend to outperform Bitcoin. That said, a six-figure Bitcoin in 2025 remains highly likely.

However, managing your risk will be crucial in this phase. The final stage of any bull run is marked by retail investors entering the market and “FOMO” (Fear of Missing Out) taking over. Without proper risk management, gains can vanish in a matter of days. That’s why I’ve spent the last two years developing a risk management tool to help protect against these pitfalls. I encourage you to leverage similar strategies.

7. Timing Altcoin Season: The Altcoin Season Index

Wondering when altcoin season might start? The Altcoin Season Index (available on our platform) is a helpful tool to track when altcoins start outperforming Bitcoin. By evaluating the proportion of the top 50 altcoins with a higher ROI than Bitcoin over a set period (usually 90 days), you can identify when to make strategic adjustments to your portfolio.

Conclusion

In summary, the outlook for Bitcoin and the broader crypto market is highly promising, with factors like the U.S. election and global quantitative easing serving as tailwinds. While the market may face some turbulence in the short term due to economic growth concerns, a long-term perspective reveals tremendous opportunities ahead.

If you found this analysis valuable, consider subscribing to our mailing list below. You’ll get exclusive insights and updates straight to your inbox, helping you stay ahead in the ever-evolving world of Bitcoin and cryptocurrency.