Bitcoin Is Now in a ‘Classic Setup’ to Surge Higher Soon, Analysts Say

On Tuesday, the price of bitcoin touched $61,242, up more than 5% from $57,633 less than 24 hours ago, representing a surge of almost $100 billion in market cap. However, many believe that it could go much higher.

According to a new report from Capriole Investments, a digital asset hedge fund, bitcoin may be on the verge of a significant bullish breakout as market conditions align in its favor. While recent months have presented volatility and uncertainty in the market, the report suggests that bitcoin could be entering a highly favorable period.

Historically, the fourth quarter and the first quarter of the following year have been among the strongest periods for bitcoin. Capriole founder Charles Edwards highlighted in the report that we are just two weeks away from entering this seasonally optimal time, which also marks the beginning of what is historically the best 12-18 month window within Bitcoin’s four-year cycle to allocate funds to the cryptocurrency. This timing aligns perfectly with the anticipated shift in Federal Reserve policy, with the Fed widely expected to start a multi-year dovish regime that could inject more liquidity into risk assets such as bitcoin. The combination of these factors creates a “perfect storm” of conditions that could drive a significant rally, according to Edwards. “You couldn’t ask for more favorable conditions for bitcoin.”

Adding to the bullish outlook is the behavior of bitcoin miners, who are currently holding onto their reserves “more than ever before,” Edwards said. The relative outflow from miners’ reserves is at an all-time low, indicating that miners are reluctant to sell their bitcoin holdings. This strong HODLing behavior from miners, who are often seen as the ultimate long-term believers in bitcoin, suggests confidence in the future price appreciation of the asset.

Other Viewpoints

Julien Bittel, head of macro research at Global Macro Investor, agrees with Capriole’s bullish outlook, noting that we are in a classic setup where financial conditions are rapidly easing, which historically positions commodities — and by extension, assets such as bitcoin — for significant gains. “At this stage in the business cycle, with financial conditions easing – and fast – we’re right in the middle of a classic setup where commodities are primed to move higher again soon, just as everyone else has turned mega bearish,” Bittel explained.

Bittel added that a weakening dollar is another tailwind for bitcoin prices, improving global liquidity as dollar-denominated debt becomes easier to service. This environment, marked by rising liquidity and a weakening dollar, could provide the perfect backdrop for a rally in bitcoin prices.

Another key point of discussion among traders this year is the impact of Bitcoin ETFs on market dynamics. Edwards argues that ETF holders should, by definition, be considered long-term holders (LTHs) because these investment vehicles are typically used by investors seeking a secure, custodial solution for long-term allocation, rather than for active trading. According to Edwards, the launch of spot bitcoin ETFs in January has caused a significant reclassification of bitcoin ownership. This shift occurred because large amounts of bitcoin were transferred into these ETFs, often from wallets associated with long-term holders.

Interestingly, the selling by LTHs that usually happens after a Bitcoin halving event began earlier than usual this cycle, coinciding almost exactly with the launch of these ETFs. Edwards suggests that while this might appear to be “front running” by the market, the timing strongly indicates the influence of the ETFs. The reclassification of bitcoin ownership and the apparent early selling by LTHs created an illusion of bearishness in onchain metrics, which Edwards argues may not accurately reflect the true market sentiment. Instead, these signals may have been distorted.

The overall perspective aligns closely with recent insights from Arthur Hayes, co-founder of BitMEX, who predicted that the next crypto bull market might be delayed until the end of September. Hayes has also highlighted the impact of broader economic conditions, particularly the Federal Reserve’s moves, on the timing of the next rally.

With all eyes on what the Fed will do on Wednesday afternoon, multiple signs are pointing to bitcoin and the crypto markets having a positive Q4.