Traders in the cryptocurrency market have been eagerly awaiting a breakout for Bitcoin (BTC), as the price has remained rangebound between $29,000 and $30,000. However, a recent report from Ark Invest titled “Bitcoin – Breakout or Breakdown?” highlights that this stagnant price action cannot continue indefinitely and suggests that significant price movement in either direction may be imminent.
The report emphasizes that Bitcoin’s volatility reached a six-year low in July, signaling the potential for a substantial price action. This observation aligns with the general sentiment among crypto market observers. Traders, on the other hand, may not fully anticipate the historical price patterns of Bitcoin during the months of August and September, as well as the impact of monetary policy on cryptocurrency markets.
According to Ark Invest, the tightening policies pursued by the Federal Reserve could serve as a leading indicator of price deflation. The report argues that there might be a time lag associated with monetary policy, suggesting that the real economy and inflation have yet to digest the effects of the Fed tightening by 300 to 500 basis points. Additionally, China’s exporting of deflation adds fuel to the deflationary fire.
This lag in the impacts of Fed tightening is projected to coincide with Bitcoin’s halving rally, expected to occur in 2024-2025. If Ark Invest’s analysis proves accurate, the next bull run for Bitcoin could potentially be more subdued compared to previous cycles. The report cautions traders to consider this possibility and adjust their expectations accordingly.
However, some analysts hold a contrasting view. Martin Froehler, CEO of Morpher, anticipates that the current macroeconomic headwinds will soon fade as the interest rate hike cycle nears completion, creating a more favorable environment for Bitcoin. Additionally, the next Bitcoin halving event, which is just nine months away, historically propels the price up dramatically. Kyle DaCruz, director of digital assets product at VanEck, supports this perspective by emphasizing Bitcoin’s scarcity and the unprecedented growth in the money supply as potential drivers for a continued rally.
Despite these optimistic forecasts, historical data suggests that the anticipated rally may not materialize in the near term. August and September historically have been the worst-performing months for Bitcoin’s price. Out of 12 years analyzed from 2011 to 2022, Bitcoin recorded positive performance only five times in August and four times in September. In addition, the negative price decreases during these months have been relatively small, indicating limited upward momentum.
Recent weeks have also seen Bitcoin’s price volatility plummet to record lows, further adding to the stagnation in the market. However, Bitcoin market observer Will Clemente points out that all of the cryptocurrency’s negative performing years have occurred two years after the halving. This suggests that the worst of the bear market could be behind us and that the largest gains for Bitcoin may lie ahead in the years 2024 and 2025.
Nevertheless, it is important to note that this article does not provide investment advice or recommendations. All investment and trading decisions carry risks, and readers are encouraged to conduct their own research before making any investment decisions.