[Deep Dives] Beyond the Bottom: Why 2024-2025 Could Be the Biggest Crypto Bull Run Yet

What if I told you the brutal crypto winter of 2022 was actually the best thing that could have happened to Bitcoin? Here's why the stage is now set for an unprecedented bull run in 2024-2025... 

The crypto market stands at a pivotal juncture. After the devastating bear market of 2022, many question whether the era of explosive growth for digital assets has ended. However, amidst the ruins, a new narrative emerges.

As Bitcoin's price cycle chart reveals, we are now 129 days into the fourth post-halving era. Macro investor Raoul Pal, CEO of Real Vision, believes this could be the final chance to position oneself for the "strong upside" of 2024-2025. 

Short-Term Price Action: Volatility Masks Underlying Strength

Amidst the turbulent waves of the crypto market in early 2024, it's easy to get caught up in the day-to-day price swings and lose sight of the bigger picture. Bitcoin and other major cryptocurrencies have experienced sharp fluctuations in recent weeks, leaving many investors questioning the underlying health and direction of the market.

However, a closer examination of the technical indicators and on-chain data reveals a market that is coiling for a potentially explosive move. 

1. The Bollinger Band Squeeze: A Market Ready to Move

One of the most compelling technical signals flashing on Bitcoin's chart is the tightening of the Bollinger Bands. This indicator, which measures volatility by plotting standard deviations above and below a moving average, has been steadily narrowing in recent weeks.

Historically, a Bollinger Band squeeze has often preceded significant price movements in the market. The longer the bands remain tight, the more explosive the eventual breakout tends to be. This compression of volatility suggests that the market is gearing up for a major move.

As of August 2024, the Bollinger Bands on Bitcoin's daily chart are exhibiting a notable squeeze, narrowing to levels not seen in recent history. This indicates that the market is coiling in anticipation of a potentially significant breakout.

While a Bollinger Band squeeze does not indicate the direction of the movement, the tightening of the bands clearly signals that the market is bracing for a period of increased volatility and potentially significant price action.

2. The MACD Crossover: A Bullish Signal

Another technical indicator pointing to potential upside for Bitcoin is the recent bullish crossover on the Moving Average Convergence Divergence (MACD). This indicator, which is widely followed by traders, signals bullish momentum when the MACD line crosses above the signal line.

In early April 2024, Bitcoin's daily MACD executed a clear bullish crossover, suggesting that positive momentum is building. Historically, MACD crossovers have been reliable precursors to significant price appreciation, especially when they occur at relatively low levels following a period of consolidation.

Of course, no technical indicator is infallible, and past performance does not guarantee future results. However, the alignment of the MACD crossover with other bullish signals, such as the Bollinger Band squeeze, strengthens the case for a potentially significant upside move.

3. Miner Capitulation: Hash Ribbons Signal an End

The Hash Ribbons indicator, which tracks the 30-day and 60-day moving averages of the Bitcoin hash rate, is signaling the end of the miner capitulation phase. When the 30-day moving average crosses above the 60-day moving average, it indicates that miner capitulation has ended, and a potential recovery in Bitcoin's price may be on the horizon.

The Hash Ribbons indicator has historically been a reliable signal for identifying the end of miner capitulation and the start of a new bull cycle. During a bear market, when Bitcoin's price is declining, miners are forced to sell their BTC holdings to cover operational costs. This selling pressure can exacerbate the price decline and lead to a vicious cycle of further capitulation.

However, when the Hash Ribbons indicator flashes a buy signal, as it has recently, it suggests that the worst of the miner capitulation is likely over. This is because miners who have managed to survive the downturn are typically the most efficient and well-capitalized operations. As these miners hold onto their BTC and the selling pressure subsides, it creates an environment conducive to a potential price recovery.

Long-Term: The Macro Catalysts for a 2024-2025 Bull Run

While short-term price action remains choppy, the macro stars are aligning for a potentially historic bull cycle in the next 12-18 months:

1.  Anticipated Interest Rate Cuts: The Monetary Policy Pivot

The recent announcement by Federal Reserve Chair Jerome Powell at the Jackson Hole economic symposium in August 2024 marks a pivotal moment. Powell's statement that "the time has come" signals the Fed's readiness to pivot towards interest rate cuts as early as the Sept. meeting, as inflation cools and U.S. job growth slows.

This unique scenario differs from previous cycles, where rate cuts were typically a response to economic recessions. In the current scenario, the Fed's anticipated rate cuts are the result of a successful battle against inflation. This distinction could lead to a more sustainable and prolonged bull market for Bitcoin and cryptocurrencies.

Prominent crypto thought leader Arthur Hayes offers a nuanced perspective on the implications of these rate cuts. In his recent article on Medium, Hayes suggests that while accommodative policy may initially boost assets like the S&P 500, gold, and Bitcoin, providing a short-term "sugar high" for markets, the effect could be fleeting if other factors, such as a strengthening yen, come into play. In the short term, lower interest rates could lead to the unwinding of the yen carry trade, potentially causing increased volatility in traditional and crypto markets. However, in the long term, central banks might respond to market instability by expanding their balance sheets through quantitative easing (QE). This injection of liquidity, which Hayes refers to as "real food" for markets, could devalue fiat currencies and make assets with finite supplies, like Bitcoin, more attractive as a store of value. While the short-term implications might lead to increased volatility, the long-term effects of continued balance sheet expansions could fundamentally strengthen the case for Bitcoin as a hedge against fiat inflation.

The Debt Dilemma: Refinancing $10 Trillion
In 2024, the U.S. faces an unprecedented challenge: refinancing approximately $10 trillion in Treasury debt. This staggering sum, nearly half of the entire national debt, must be rolled over in a high-interest rate environment. The scale of this refinancing operation puts immense pressure on the government to secure favorable borrowing costs.

The Fed's pivot towards rate cuts can be seen as a strategic move to manage this debt burden. Lower rates would reduce the cost of servicing this debt, potentially averting a fiscal crisis and freeing up resources for other economic priorities. This monetary policy shift could have far-reaching implications for all markets, including crypto.

Inflation: The Cooling Embers
After surging to multi-decade highs post-pandemic, inflation is showing consistent signs of moderation. The latest CPI data (July 2024) revealed annual inflation at 2.9%, the lowest since early 2022. This cooling trend stems from easing supply chain issues, softening demand, and fading base effects.

While still above the Fed's 2% target, this downward trajectory gives policymakers more flexibility to support economic growth. As the risk of runaway inflation recedes, the Fed gains room to consider rate cuts, potentially boosting liquidity in financial markets – a historically positive signal for risk assets like cryptocurrencies.

2. The Liquidity Link: M2 and Crypto Cycles

The anticipated shift towards interest rate cuts has significant implications for the crypto market, given the historical relationship between monetary policy, liquidity, and crypto prices. A key indicator to watch? The growth in global M2 money supply.

M2, which includes cash, checking deposits, and easily convertible near money, is a key measure of the total liquidity in the financial system. Historically, periods of expanding M2 growth have been associated with rising prices for risk assets, including cryptocurrencies.

Notably, Bitcoin's price peaks have consistently lagged peaks in M2 growth by an average of 15 months across the past three halving cycles:

• 2012: M2 growth peaked in January; Bitcoin's price peaked 22 months later in November 2013.
• 2016: M2 growth peaked in October; Bitcoin's price peaked 14 months later in December 2017.
• 2021: M2 growth peaked in February; Bitcoin's price peaked 9 months later in November 2021.

This pattern suggests that the expansion of the money supply acts as a key driver of crypto market cycles, with the lag potentially reflecting the time it takes for newly created liquidity to filter through the financial system and into crypto assets.

Fast forward to today, and global M2 growth has rebounded sharply from the lows seen in late 2023, with the latest data showing a new all-time high. This expansion in liquidity, combined with the anticipated shift towards interest rate cuts, could create a powerful tailwind for the crypto market in the coming months and years.

3. The Bitcoin Halving Cycle: 2024-2025 Bull Forecast

As we look ahead to the potential "halving bull market" in 2024, it's crucial to consider the complex interplay of the Bitcoin halving cycle and the current high-interest macro environment. Historically, monetary policy and liquidity have been the dominant factors influencing the crypto asset market, while industry fundamentals have determined the height and length of bull markets.

Monetary Policy and Liquidity: The Macro Dance

The macroeconomic environment in 2024 is undoubtedly less favorable than in 2019, with central banks worldwide grappling with the aftermath of unprecedented stimulus measures and the spectre of persistent inflation. However, as inflation begins to slow and various economic indicators reach their targets, an improvement in the macro interest rate environment in 2024-2025 is becoming increasingly likely.

The Federal Reserve, in particular, will play a crucial role in shaping the liquidity landscape. As the Fed shifts from its current tightening stance to a more neutral position, and eventually to a rate-cutting cycle, we can expect a significant influx of capital into risk assets, including Bitcoin and the broader crypto market.

Historical data supports this narrative. In the past three halving cycles, Bitcoin's price peaked an average of 15 months after the M2 money supply growth reached its peak. This historical relationship between M2 growth peaks and Bitcoin price action suggests that monitoring global liquidity trends could provide valuable insights into potential future price movements.

The Halving Cycle: Diminishing Returns?

While the Bitcoin halving has historically been a major catalyst for bull markets, it's important to recognize that each successive halving has had a diminishing impact on price appreciation. As Bitcoin's market capitalization has grown, the multiplier effect has decreased.

This trend is likely to continue in the 2024 halving cycle. With increased institutional adoption and the proliferation of derivative products, Bitcoin's price volatility may be somewhat suppressed compared to previous cycles. Nonetheless, the supply shock induced by the halving, coupled with the anticipated improvement in the macro environment, still points to a significant potential upside.

Projections for the 2024-2025 bull market vary, with estimates 2-3x increase from current levels, potentially reaching new all-time highs. Key industry experts have made varying predictions:

• Michael Saylor: In a longer period, such as 6-18 months after the split, Bitcoin should jump by 4x
• Mechanism Capital: Andrew Kang predicts BTC can still reach $100k by 2025
• Raoul Pal: Bitcoin could reach $250,000 within 18 months
• Bernstein: $150,000 year-end target for 2024, peak of $250,000 in 2025
• Standard Chartered:  $150,000 by year-end, comparing to post-gold ETF conditions
• Pantera Capital:  Next bull cycle peak roughly 1.3 years (480 days) after the halving
• JPMorgan: Warns of a potential correction post-halving to $42,000

While the halving event is still expected to trigger a bull market, the multiplier may be lower than in previous cycles due to Bitcoin's growing market cap. Nonetheless, even a 2-3x increase represents significant upside potential, with the peak likely occurring in 2025.

The Benner Cycle: Predicting the Future

The Benner Cycle, a long-term economic forecasting model developed by Samuel Benner in the 19th century, provides a compelling perspective on the current state of the crypto market. We have reached a point where the bitcoin bottom was already hit in November 2022 (Benner Cycle predicts 2023). Currently, we are witnessing numerous signs pointing to an impending influx of liquidity, indicating why now is still the best time to accumulate and build your portfolio while there are great discounts in the market.

 4. U.S. Presidential Election Cycle: The Crypto Wild Card

The 2024 U.S. presidential election could significantly impact the crypto market, with the winning candidate's policies potentially accelerating or hindering the industry's growth. A victory by a pro-crypto candidate like former President Donald Trump might boost market sentiment, given his record of expansionary fiscal policies and recent disclosures of personal crypto gains. However, any uncertainty or legal challenges faced by Trump could contribute to short-term market volatility. Conversely, a win by President Joe Biden or a similarly cautious candidate might extend regulatory uncertainties, potentially tempering crypto adoption and growth.

• 2012 US election: BTC peaked about 12 months later (November 2013)
• 2016 US election: BTC peaked about 12 months later (November 2017)
• 2020 US election: BTC peaked about 12 months later (November 2021)

Historically, Bitcoin has experienced significant price appreciation in the months following the last three elections. Interestingly, these rallies have also coincided with peaks in M2 money supply growth, suggesting that election-year monetary policy could be a key driver of crypto performance. With the Federal Reserve potentially transitioning to a more accommodative stance in 2024, the election-year effect could be particularly pronounced.

Ultimately, the long-term impact on the crypto market will hinge on the specific policies enacted by the winning party.

5. Institutional Adoption: The Tipping Point 

The regulatory clarity and policy support that could emerge from the 2024 U.S. presidential election cycle would dovetail with the already accelerating trend of institutional adoption in the crypto market. Over the past year, we have seen major strides in this direction, with traditional finance giants like BlackRock, Fidelity, and Goldman Sachs expanding their crypto offerings and infrastructure.

The potential approval of spot Bitcoin ETFs in the U.S. would be a game-changer in this regard, providing a regulated and accessible on-ramp for institutional investors to gain exposure to the asset class. With over $10 trillion in assets under management in the U.S. ETF market alone, even a small allocation to Bitcoin and other digital assets could translate into a massive influx of capital.

Moreover, the growing recognition of Bitcoin as a maturing asset class and potential hedge against inflation and geopolitical risk is likely to fuel further demand from institutional investors. In an increasingly uncertain and multipolar world, the neutrality and decentralization of Bitcoin and other crypto assets could become ever more attractive to both individuals and institutions seeking to diversify their portfolios and reduce their dependence on traditional financial systems and reserve currencies.

Navigating the Risks: Black Swans and Regulatory Headwinds

The path to new all-time highs won't be without obstacles. Potential pitfalls include:

• Regulatory Crackdowns: While the tide seems to be turning, hostile policies remain a threat.
• Economic Shocks: Major macro disruptions could rattle risk assets.
• Yen Carry Trade Unwind: Hayes warns that rapid yen appreciation due to narrowing interest rate differentials could destabilize markets.

However, as the old adage goes: "Be fearful when others are greedy, and greedy when others are fearful." With the Bitcoin Fear & Greed Index in "Extreme Fear," smart money is beginning to position for the next great bull run.

Investor Playbook: Navigating the Bull Market

To maximize your gains in the upcoming bull market, consider implementing the following "Bitcoin Exit Trilogy" strategy: Buy the dips during phase one, stop buying & HODL when actual rate cuts begin. After 9-22 months following the M2 growth peak, this is the time to start taking profits. When you have additional funds, DCA to invest, avoid using leverage, crypto already volatile enough. Maintain a curious and rational mindset to navigate the market effectively.

As we navigate through these complex market dynamics and implement our investment strategy, it's worth considering the perspectives of seasoned macro investors. Raoul Pal, CEO of Real Vision, offers a compelling outlook:

"I personally think of this as a violent shakeout and a reset of risk-taking leverage and that strong upside will be the feature of 2024/2025 overall. Thus to me, this is the last time to get in or fully positioned."

Conclusion: Positioning for the Long-Term

The confluence of the Bitcoin halving, anticipated monetary easing, and accelerating institutional adoption creates a perfect storm for crypto assets. This once-in-a-cycle setup could lead to explosive growth over the next 12-18 months.

While the road ahead remains volatile, one thing seems certain: the bottom is in, and the stage is set for a potentially historic bull run. Those who can weather the turbulence may be handsomely rewarded.

So buckle up, zoom out, and remember: the best is yet to come!

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In an average bull market, you will have to survive the following drawdowns:

Six 5-10% drawdowns 👀
Three 10-20% drawdowns 🎢
Two 20-30% drawdowns ⚡
One 30-40% drawdown 🌊
One 40-70% drawdown 🤤

While these corrections can be nerve-wracking, they also present incredible opportunities for long-term investors to accumulate crypto assets at a discount.

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Disclaimer: This is not financial advice. The content in this article represents only the personal views of the original author and is intended for discussion, sharing, and education purposes only. DYOR (Do Your Own Research)

Key takeaways:

• Short-term price movements may remain choppy, but underlying fundamentals point to significant upside potential.
• For long term, the macro environment appears increasingly favorable for Bitcoin and crypto assets.
• While upside targets vary, most analysts expect the next bull run to reach new all-time highs for Bitcoin and major altcoins.
  
• Risk management and a long-term perspective remain crucial for navigating this high-potential, high-volatility market.
  

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