Bitcoin’s Last Shot Below $57K?

Since its all-time high in March, Bitcoin has struggled to surpass its peak, consistently making lower lows and lower highs. This trend has led some to believe that Bitcoin and the broader crypto market might be on a downward trajectory. However, I argue that this apparent “bareness” could lead Bitcoin to dip below $54K, presenting a once-in-a-lifetime accumulation opportunity, especially as 2025 promises to be a pivotal year for Bitcoin and the crypto market.

Monitoring Key Metrics

To understand whether Bitcoin could dip below $54K, it’s crucial to monitor specific metrics. In 2019, Bitcoin faced its first rate cuts, and with a 90% probability of the first rate cut in September 2024, we should explore any parallels. Back in 2019, Bitcoin struggled to surpass its bull market support band (20-week SMA and 21-week EMA) and formed three lower lows/highs before its exponential rise in 2021. Ignoring the black swan event of COVID, which is unlikely to repeat in the next two years, we see a similar pattern emerging in 2024.

Currently, Bitcoin is within the bull market support band, with the first line of support at the 21-week EMA ($61.6K). If the bulls fail to hold this line, another lower low could mark an excellent accumulation period before a significant rise in 2025. Historically, Bitcoin formed a local top a month before the first rate cut, and the end of rate cuts marked the end of a prime accumulation period. This pattern, combined with the approval of Bitcoin spot ETFs, which adds new buying pressure, suggests that a drop below $54K would increase the likelihood of a bullish reversal.

Debunking the March Cycle Top Claims

Some believe that Bitcoin’s March top was the cycle top and that we are now on a downward spiral. However, several models, such as the Free Float MVRV, Net Unrealized Profit/Loss (NUPL), and our Risk Metric, indicate otherwise. These models, available on our platform, are excellent at signaling tops. I recently made a video about these models, which you can watch on our Youtube Channel.

Recently, a model called the Power Law has gained traction, showing that Bitcoin’s price follows a predictable equation. This model helps us understand where we are in the cycle and project future values. You can experiment with this interactive graph on our platform, which is currently the best equation we have to describe Bitcoin’s price action. I found also that the total crypto market follows a power law with an exponent greater than Bitcoin’s, suggesting that the altcoin market is a net positive for the crypto sector. Despite numerous “bad” projects, the growth of the total crypto market appears extremely promising, with projections for 2025 suggesting a market cap of $10 trillion.

Using the Power Law model, we see that the March top does not resemble any previous cycle top (deviation >74%), as Bitcoin and the total crypto market cap were around their fair value with no signs of overextension. The historic approval of the spot ETF by the SEC brought euphoria but not sustained retail interest, marking a shift toward institutional adoption.

Beyond charts, significant bullish news could turbocharge Bitcoin’s price:

1. Quantitative Easing: Central banks around the world are expected to engage in quantitative easing, purchasing long-term securities to increase the money supply, lower interest rates, and stimulate economic activity. This influx of liquidity generally boosts asset prices, including Bitcoin, as investors seek higher returns in a low-interest-rate environment.

2. Pro-Crypto US President: A pro-crypto administration in the US could remove legislative barriers and foster an environment conducive to crypto innovation. This could lead to policies that support the use of Bitcoin as a reserve currency and promote broader adoption. Such political support would likely attract more institutional and retail investors to Bitcoin.

3. US Debt Problem: The exponential growth of US debt is a growing concern. As debt levels become unsustainable, wealthy individuals and institutions may seek to protect their capital by investing in “hard” assets like Bitcoin. Bitcoin’s finite supply and decentralized nature make it an attractive hedge against inflation and economic instability.

4. Institutional Support: Major financial institutions are increasingly supporting Bitcoin. For example, BlackRock and Fidelity, two of the world’s largest asset managers, have been actively promoting Bitcoin, collectively holding over $34 billion worth of Bitcoin in just seven months. This level of institutional endorsement not only legitimizes Bitcoin but also brings significant buying pressure, driving up its price. Companies like BlackRock and Fidelity are expected to continue growing their BTC holdings and advocating for Bitcoin to their clients.

5. Geopolitical Tensions: In times of geopolitical instability, Bitcoin’s unique properties become particularly valuable. Bitcoin cannot be seized, retains its value, and can be transferred globally with minimal restrictions. These attributes make it an ideal asset for preserving wealth during conflicts. As geopolitical tensions rise, more individuals and institutions are likely to turn to Bitcoin as a safe haven. Larry Fink, the CEO of BlackRock, highlighted Bitcoin’s resilience and utility during such times on live US TV, underscoring its potential as a store of value saying that Bitcoin is a "flight to quality".

Conclusion

2025 is set to be one of the most explosive years for Bitcoin. Not having any allocation in Bitcoin, even a small one, poses a greater risk than having none. If the 2019 scenario plays out, it could be the last opportunity to enter the market at prices we won’t see for at least the next two years. With quantitative easing favoring “risky” assets, Bitcoin, despite being considered less risky by some, will attract significant capital flow, benefiting altcoins as well. Study Bitcoin and crypto thoroughly to take advantage of the upcoming opportunities. As the market shifts into a risk-on mode, driving substantial capital into BTC and altcoin is crucial to understand where we are in the cycle and adjust your strategy accordingly.