After seven months of consolidation, the price of bitcoin is approaching its all-time high of $73,000. Is it time for a sustainable breakout? An analysis of short- and long-term catalysts for the crypto markets".
In March, bitcoin broke its previous all-time high from November 2021 for the first time. Driven largely by massive inflows into the then-new spot bitcoin ETFs, the price surpassed the previous high of $69,000 by 6.7%. However, the largest cryptocurrency by market capitalisation stagnated. ETF flows slowed, and billions of bitcoin entered the market via Mt. Gox exchange redemptions and sales by Germany's Federal Criminal Police Office (BKA). Half a year later, bitcoin is making another attempt to break out.
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Increased chances of a Trump victory boost markets
In the short term, the recent gains may be linked to the shifting odds in the US presidential race. On betting platforms such as Polymarket, Republican candidate Trump has seen a significant rise. Known for his strong pro-blockchain stance, Trump wants to position the US as a central hub for bitcoin and related technologies. As a result, the increased odds of a Trump victory are exciting the crypto markets.
In contrast, Kamala Harris and the Democrats have taken a more cautious approach to cryptocurrencies. Nevertheless, a Harris victory is unlikely to derail bitcoin's medium-term uptrend. A decisive election result could reduce the current market uncertainty, potentially leading to capital inflows into "risk assets" - including bitcoin.
"The reduction in uncertainty is almost always positive for asset prices, and we're at that moment of peak uncertainty in a race that Trump is favored to win but it's almost a coin toss, so I would say that post election we'll generally see a risk-on environment as people come to adapt and adopt a new regime whether it's a Harris regime or a Trump regime, this uncertainty will be behind us." - Ken Griffin, CEO Citadel
Implications for the broader crypto market
For the broader crypto market, current trends suggest a promising outlook for 2024 and 2025. Medium-term catalysts continue to support positive performance. Bitcoin ETFs have recently seen strong inflows, totalling over USD 3 billion in October alone. This inflow has pushed bitcoin's dominance to almost 60% - a level typically seen at the start of a bull market. Historically, bull cycles have started with bitcoin at the top, characterised by rising dominance, followed by other sectors outperforming bitcoin and posting even stronger gains.
The necessary ingredients for a sustained bull market seem to be coming together. As mentioned above, a key factor remains bitcoin's ability to break decisively through its all-time high. Such a move would cement bitcoin's leadership position and strengthen the foundation for digital assets, signalling the start of a long-term bull trend across all sectors.
Key catalysts for sustained bitcoin price growth
- National level: Bitcoin's role at the national level could extend beyond first adopters such as El Salvador and Bhutan, as other countries explore bitcoin's potential as a strategic reserve currency. In the US, for example, Senate Bill S.4912 has been introduced to consider adding bitcoin to the country's reserves. Other nations are also exploring the introduction of bitcoin.
- Enterprise level: MicroStrategy is an example of how bitcoin can serve as a balance sheet asset, providing a compelling alternative to cash holdings. On December 10, Microsoft shareholders will vote on a proposal to allocate up to 1% of the company's balance sheet to bitcoin. Even if the initiative does not pass, this discussion signals a broader shift as other companies consider the potential role of bitcoin in financial management.
- Market level: The fundamentals of bitcoin distribution remain solid, with wallet addresses holding over 1,000 bitcoins reaching all-time highs. Institutional allocation to bitcoin and crypto assets remains limited, and retail investors are not yet fully engaged, as evidenced by low Google search trends.
Combined with bitcoin's limited supply and the increasing adoption of other blockchain networks, these factors point to strong potential for market expansion towards the end of 2024 and into 2025. During this period, interest and investment across the crypto ecosystem could increase, driven by institutional and retail adoption, setting the stage for a robust growth cycle.
