Monday Market Musings | Week 4
The Catalyst For A Bull Run
Today let's get in the mood for the Bitcoin halving that will happen somewhere in April this year. Traditionally, this is the catalyst for a new bull run, and that bull run is of course what everyone is waiting for. Securing profits! That's what many of us are looking forward to. After all, every Bitcoin bull run so far has created a new Bitcoin All-Time High. Do you also have a plan ready that you will implement in this bull run? Or do you live more day by day and don't have a plan in place because you think, "I'll act when the time comes?"
Bitcoin [BTC] has gone through four notable cycles in its roughly ten-year history, with each new cycle marked by an all-time high in prices. From the well-known payment for pizza with Bitcoin to the moment when the first Bitcoin ETFs were recently launched by large investment companies. You could say that Bitcoin has made quite a journey through the financial world. And while many people expected that these Bitcoin ETFs would cause a price increase, so far it has turned out that this has become a "Sell The News Event". But where are we now?
It May Have Even Started Already
Roughly speaking, we have a bull run every three to four years, and you could say that we are now on the eve of the start of a new cycle. It may have even started already! To understand why these cycles exist, and why they are so predictable, we need to take a deeper look.
The true crypto enthusiast will undoubtedly tell you that Bitcoin's halving cycle is timed every four years. The mining reward and mining difficulty are adjusted every four years. That drives up the price of Bitcoin in two ways. First, to keep the costs of mining profitable, the Bitcoin price must increase. Secondly, because there are fewer new Bitcoins that can end up on the market. This makes the asset increasingly rare, and as with anything rare, the price goes up.
And yes, this is the basis, but this is not all that plays a role. Bitcoin and other cryptocurrencies represent a highly volatile asset class, with significant risks. Crypto is very sensitive to fraud, and there have been quite a few security problems. And we also have to deal with often unclear regulations.
Liquidity
Another very important element to understanding the cycle is liquidity. And liquidity goes up and down with the economy. If the economy is in difficult times, there is simply less liquidity to invest in crypto, and people are therefore not as inclined to invest the liquidity they have in a volatile risk asset like crypto. At such times, the demand for safer assets is much greater. This also works the other way, if we have a time when the economy is growing and flourishing exuberantly, then people are more likely to invest in crypto.
During the COVID-19 pandemic, monetary policy was adjusted to reduce the cost of debt and implement quantitative easing, leading to a rise in inflation. Central banks, such as the US Federal Reserve, have responded by raising interest rates.
September 2025
An interesting approach to predicting the Bitcoin macrocycle and timing the next peak is based on a 65-month sine wave. This suggests that the top of the next cycle will likely be in the fourth quarter of 2025, around September. The Bitcoin Rainbow Chart also corresponds well with this. Furthermore, we can also get an idea by calculating the time of previous cycles. For example, it took almost three years for Bitcoin to go from the low of $3,000 in December 2018 to the high of $69,000 in November 2021.
Interestingly, Bitcoin took 1435 days to go from the peak of the cycle in 2017 to the peak in 2021, which is shorter than the estimated 65-month cycle. Another chart we could use to make an estimate is The Global Liquidity Cycle Index. In 2021 and 2023, this index was quite similar to Bitcoin's MVRV ratio. This MVRV ratio has been on an upward trend for a year.
It is important to know that the MVRV ratio is currently nowhere near the cycle top value of 3.7. The Global Liquidity Cycle Index is also nowhere near 100. The Global Liquidity Cycle Index is expected to peak around September 2025, and the fact that both cards are still so far from their respective peaks suggests that BTC -prices still have time and room to rise, and that could indicate that Bitcoin will continue to go with all the cards, and will top around September 2025.
Will The Institutional Money Influence The Cycle?
This coming bull run is the first where we see an influence from institutional money invested. But will the influx of institutional money also affect the time it takes for BTC to go from a low to a high? Or does Bitcoin follow its path and follow its cycle that we could already read in the cards?
The final answer will only become clear with time. There are no perfect predictions. But these charts can give you an idea of when the peak or trough of the next cycle might be. The crypto market remains dynamic and full of surprises where we will always have to use our common sense. If you want profit you have to understand what you are doing, and that means as always ...
DYOR
Have a nice week everyone!