Deep Macro Research on Bitcoin

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In today’s newsletter, instead of our usual format and top headlines, we’re bringing you exclusive insights on Bitcoin market cycles, which will be crucial to understand Bitcoin’s next move.

📅 Today

🔍️ Market Outlook For The Week

• Overall Bias - Cautious 🙏 

• BTC dipped to it’s 200 Daily EMA at ~$60,000

• This EMA held as support which is bullish.

• BTC is now trying to break the crucial $66,500 resistance.

• If this level breaks, the final key level to break would be $70,500, after which it should be up-only.

• Historically, Q4 has been the best-performing quarter for BTC so that we can expect some bullish momentum due to seasonality.

• It is wise to not take any new leveraged positions till BTC closes above $70,500, and just DCA in spot instead.

• On the lower end, the 200 Daily EMA continues to remain an important zone that bulls must hold if they want to take BTC to new all-time-highs soon.

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📕 Educational

Introduction to Bitcoin Halving

Since bitcoin’s existence since 2009, the halving event has happened only 4 times so far The previous halving dates were November 28, 2012, July 9, 2016, May 11, 2020, and April 20, 2024. After the latest halving, BTC block rewards from miners were reduce from 6.25 BTC to 3.125 BTC.

Since the halving reduces the BTC supply by half, market cycles for Bitcoin have been fairly predictable and recurring.

Assuming the demand for bitcoin is increasing (or constant), any reduction in supply would theoretically drive the prices of BTC up. This is exactly why the price of Bitcoin tends to rally to new all time highs post-halving.

Since their launch earlier this year, U.S. Spot Bitcoin ETFs have accumulated over $50 billion worth of BTC, highlighting the strong demand for the asset. Combined with the post-halving supply reduction, Bitcoin is expected to convincingly outperform traditional asset classes in the coming months.

Historic Market Impact

Here are the price performances of bitcoin immediately after the previous 3 halving events 👇

1. November 28, 2012 : Price pumped from ~$12 to ~$1,150 in December 2013, a gain of ~9,500%
   

2. July 9, 2016 : Price pumped from ~$650 to ~$20,000 in December 2017, a gain of ~3,000%
   

3. May 11, 2020 : Price pumped from ~$8,500 to $64,000 in April 2021, a gain of ~650%

Market Cycle Returns Across Phases 

Bear market returns can be seen below : (Intense crypto winter)

2014 : - 71.75%

2018 : -58.36%

2022 : -63.62%

Returns of the pre-halving years can be seen below : (Accumulation zone - Bulls & Bears fight it out here) 

2015 : +37%

2019 : +94%

2023 : +125%

Returns of the halving years can be seen below : (Pre-bull phase)

2012 = +121% 

2016 = +124% 

2020 = +305%

2024* = +48.70% (so far)

Returns of the post-halving year can be seen below : (Bull market Euphoria & Cycle Top)

2013 : +6187%

2017 : +1271%

2021 : +59%

2025 : XXX

Current Cycle Position :

Bitcoin has been consolidating in a tight range between $50,000 & $75,000 for the past 230 days. At this point in the cycle, Bitcoin has significantly underperformed compared to previous cycles post-halving. Notably, this is the first time Bitcoin’s price is below its halving price 180 days after the event. 

However, when looking at returns from the market cycle bottom, BTC’s ROI is still consistent with past cycles. This underperformance was anticipated and is actually healthy, as Bitcoin broke its previous all-time high before the halving for the first time in history. ‘

The current consolidation is slowing the cycle's pace, bringing it closer to previous cycles. While the cycle was previously accelerated by about 250 days, it’s now only ~50 days ahead. This suggests that even if Bitcoin doesn’t break its all-time high in the next 50 days, it would still be in line with the performance of prior cycles

Key On Chain Metrics 

1. Rising Stablecoin Reserves on Exchanges 

Larger stablecoin balances on exchanges often lead to higher Bitcoin prices. 

Since January, USDT (ERC20) balances on exchanges have surged 146%, from $9.2B to $22.7B, even while Bitcoin’s price remained flat.

2. Whale Averages
   
   

The price of Bitcoin has never fallen below the cost average of wallets holding more than 10,000 BTC. Even during bear markets, the cost average of wallets with over 10,000 BTC has acted as a support level.

Since March 3rd, we have observed significant purchases from accounts holding more than 10,000 BTC, and currently, their average is at 39,874.

Even if we enter a bear market, the 39,874 level could serve as an excellent support

3. Short-Term Holder cost basis

Bitcoin has reclaimed the Short-Term Holder cost basis ($61.9k) and 200DMA ($63.9k) following a 0.50% interest rate cut by the Federal Reserve.

Short-term holders are under marginally less pressure as prices rise above their cost basis, after a period of net capital outflows.

This remains a key level of short-term support for BTC in case it wants to break to new all-time-highs relatively quickly.

Looking Forward :

Key prices to keep an eye on for Bitcoin are $70,500 & $45,000

• $70,500: Weekly Supertrend turns bullish if BTC closes above this. Historically, this has signaled strong bullish momentum with a 75% success rate (9/12 times since 2015) and a return of over 780%.

• $45,000: Current average mining cost. Staying above this level supports a bullish outlook.

Tailwinds for Bitcoin : 

• Spot ETFs & Institutional Inflows: US Spot ETF inflows have surpassed $50 billion, marking the most successful ETF launches ever. This signals increased demand from institutions and individuals for Bitcoin.

• Rate Cuts: The FED has initiated its rate-cutting cycle, with inflation now below 2.5%. The market expects further cuts, and quantitative easing (QE) is typically bullish for risk-on assets like Bitcoin.

• Post-Halving Seasonality: Bitcoin historically outperforms in post-halving years, often delivering outsized returns that signal market cycle tops.

• Election Year Seasonality: Election years have typically created favorable conditions for risk assets, including Bitcoin, due to heightened market activity and positive sentiment.

• Retail FOMO: As Bitcoin’s price rises, retail investors are likely to jump in due to fear of missing out. If BTC hits $100k, retail-driven demand could accelerate the price surge further.

Headwinds for Bitcoin : 

• Recession Threats: A looming recession, especially if labor market continues to deteriorate in the USA, could shift investors away from risk assets, impacting BTC negatively.

• Geopolitical Conflicts: Escalating conflicts in the Middle East or elsewhere could lead to market instability and reduced risk appetite for Bitcoin.

• SEC Regulations: Increased regulatory pressure from the SEC, specially stricter rules around crypto exchanges or digital assets could hinder Bitcoin’s growth and adoption in the U.S

What to Expect 

Bitcoin, like other assets, follows the law of diminishing returns, meaning each cycle brings a lower ROI from cycle bottom to peak. As Bitcoin’s market cap grows, it requires significantly more liquidity to push prices higher.

In the previous cycle, Bitcoin saw a 600% increase from the halving to the all-time high (ATH). Based on this, we can reasonably expect a 200-300% increase this cycle, maintaining the trend of diminishing returns. This would place BTC's next ATH between $120,000 and $200,000.

Historically, market cycle tops occur around 400-500 days post-halving, suggesting the next ATH may occur by mid-2025, assuming the cycle's current acceleration gradually slows down to 0.

Equally importantly, we believe that altcoins are soon set to start to outperform BTC going forward. Bitcoin dominance is currently at 58%, and we expect it to hit at-least 60% before reversing. 

 Once BTC breaks $70,500 and its dominance declines, altcoins are expected to go parabolic, likely in 2025

Importance of Capital Rotation 

Historically, newer altcoins like Solana (Cycle 1 coins) tend to outperform Bitcoin, especially during post-halving years, as seen in previous cycles.

Bitcoin dominance typically falls in these periods, leading to massive altcoin rallies.

In the last cycle, the top 100 altcoins gave an average return of over 900% from halving to their respective all-time-highs, compared to Bitcoin’s 600% return in the same timeframe

This makes it wise to rotate capital from BTC and ETH into altcoins to maximize returns during the alt-season

Conclusion 

Bitcoin’s predictable post-halving cycles and diminishing returns suggest that while BTC will continue to perform strongly, its gains are becoming more moderate as its market matures. With Bitcoin's next all-time high projected between $120,000 and $200,000 by mid-2025, the real opportunity lies in capital rotation. As Bitcoin dominance peaks around 60%, altcoins are set to outperform, especially newer cycle 1 coins which have historically delivered significantly higher returns during post-halving bull markets.

For investors, the strategy is clear: while holding Bitcoin remains a safe bet, rotating capital into top-performing altcoins as BTC approaches its cycle peak will likely yield higher returns. With institutional inflows, favorable economic conditions, and historical trends signaling a strong 2025, positioning for alt-season could be the key to maximizing profits in the next phase of the crypto market.

That concludes our update for today!

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Disclaimer : None of the content shared in the newsletter is financial advise. Always do your own research and analysis before investing.