According to the historical behavior of bitcoin (BTC), it may be entering a bull market phase, motivated by 2 key factors. This is highlighted by the Brazilian investment company Hashdex. In a report on this matter, the company indicates that, since the first halving of the digital currency in 2012, BTC has followed a pattern made up of three phases: a bullish cycle of approximately one year, a bearish stage of 13 months, and a period longer recovery of 22 or 23 months before re-entering a one-year bull market.
The current month, October, is the 23rd of the current recovery phasewhich began after the November 2022 low. For Hashdex, this “suggests that we are indeed entering, or very close to entering, the next phase of the bull market.” Furthermore, it is noted that the rise of the currency in September, a month that is usually bearish, reinforces the repetition of this pattern. “The short-term outlook is strong, especially considering that October has historically been a very positive month for prices, with BTC averaging an increase of more than 28% since 2010,” he says. You can see below the phases of the cycles that bitcoin has gone through throughout history.
Bitcoin price in each cycle. Source: Hashdex. With this in mind, it is worth noting that There are factors that can influence how quickly this bull market advances.. In his opinion, the two most important are the pace of monetary easing and the results of the presidential elections in the United States. Regarding the first, it is worth noting that both the United States and China have cut interest rates in September. Furthermore, the latter announced a stimulus package to support its struggling economy. “These developments have contributed to increased liquidity conditions, which have historically been very positive for risk assets, including BTC,” explains Hashdex. In fact, as the following graph shows, bitcoin has historically been a strong indicator of liquidity conditions, as reported by BitcoinDynamic. The company highlights that the price of the currency has moved in the direction of global liquidity more than 80% of the time, a higher percentage than the S&P 500 and any other major asset class.
Bitcoin price in blue and global liquidity in orange. Source: Hashdex. “Therefore, if the market perceives that global liquidity will continue to increase (i.e. further easing by central banks), BTC should benefit, especially if labor conditions and other economic data continue to reduce recession fears.” , consider Hashdex. Regarding the second factor mentioned, it details that the result of the US elections, especially the presidential one in November, will surely impact the immediate future of this asset class. “Markets don't like uncertainty, and for an emerging industry like cryptocurrencies, the uncertainty of the November elections will be a concern,” he comments. However, he highlights that there have been recent developments that support the thesis that, Regardless of who wins (Donald Trump or Kamala Harris), the cryptocurrency sector will enter a more favorable political environment.
Presidential candidates show support for the bitcoin ecosystem
The candidate and former president Trump has been very explicit in his support for Bitcoin and to the cryptocurrency industry. He even proposed that the United States hold BTC as a long-term investment, which would likely make it take a proactive stance towards the development of the industry. On the other hand, candidate and Vice President Harris has not shared such an open vision about the industry. Although last week for the first time he gave a speech in which he expressed his support for the “digital assets” industry, as long as the security of investors is preserved. According to Hashdex, this will be the first election in the United States in which the “crypto voter” exists. According to a Coinbase report, there are more Democratic cryptocurrency investors than Republicans, and two-thirds of them are excited to vote for candidates who support these assets. For Hashdex, This technology, like the Internet, is not inherently political and will eventually become less partisan. “In fact, we are already seeing it, as some influential leaders in the Democratic Party appear to be moving toward a more open approach,” he exclaims.
“Regardless of how quickly this happens, in the short term, the most likely outcome of the election is a new administration that is not proactively against this industry. Therefore, we believe that the transition from the current administration to the next, regardless of which party wins, will be a net benefit for investors in this space.” Hashdex, Brazilian company in the cryptocurrency industry.
With this panorama, he foresees that, in the next three months, monetary policy decisions, election results, geopolitical events will influence the short-term outlook for cryptocurrencies. Meanwhile, in the long term, he firmly believes that the case for this asset class remains stronger than ever.