Entering the S-Curve
The Long View
While bitcoin's price action has been characterized by sideways motion since the spring, the current last quarter (Q4) offers clearly positive signals. First of all, bitcoin is heavily influenced by seasonality: the average Q4 return been 82.09%, with a median return also being significantly positive (32.32%). Secondly, the liquidity environment is shifting quickly, as central banks re-align their interest rates.
Michael Saylor was recently interviewed by CNBC, and as usual, the outcome emphasized his adamant long term vision:
"Bitcoin is 0.1% of the capital in the world right now. I think it's going to go to 7% of the capital."
"My long-term forecast is it's going to go to $13 million over 21 years. 13 million."
"And at some point, it'll be the S&P return plus 8%, and it'll be the S&P vol plus 8%, because it's always going to be a more global return."
"Bitcoin is an expression in this view that you want to invest in an asset without counterparty risk, which means you don't want to be counterparty to a country, a currency, a city, a company, a commodity, or a culture."
Saylor's views resonate with the conclusions of OTX exchange's recent report, highlighting the growth of digital asset market capitalization. OKX expects the aggregate market cap of cryptos to reach $10 trillion by the end of the decade.
Source: OKX
According to the Diffusion of Innovations Theory, bitcoin may now be entering the early majority phase, while its market share follows an S-curve. This phase is also characterized by parabolic spot price advances.
Source: Rogers Everett
Bitcoin's relationship and correlation with global liquidity have been intensively discussed during recent years, and analysts like Raoul Pal have used the context in their macro-level models.
Pal has seen a tight correlation between bitcoin and global liquidity, estimating it rising to 87 percent. According to him, the correlation is driven by the fact that bitcoin's price is influenced by the same macroeconomic factors that affect liquidity, such as interest rate policy.
Source: Ecoinometrics
From a long-term vantage point, the crypto market seems to follow Raoul Pal’s Exponential Age thesis, according to which technological development will accelerate the markets and change our perception of money.
Towards Re-Accumulation
The current technical structure of bitcoin could shift into a Wyckoff accumulation pattern, in which institutional "smart money" investors quietly buy at favorable prices, absorbing selling pressure from weaker market participants. However, Dow theory could be the instrument of choice for understanding current market mechanisms. In a simplified way, the Dow theory divides market movements into three phases: The accumulation phase, the absorption phase, and the distribution phase.
Although the Dow theory was initially used to interpret the stock market, it can also be applied to digital assets. Applying the Dow theory, bitcoin’s price development over the last couple of years can be divided into accumulation and distribution cycles. The year 2022 represented a clear distribution cycle, bringing bitcoin into a technical inflection point at the turn of 2022-2023.
The last year was clearly an accumulation phase (turquoise), which culminated in a distribution cycle in 2024 (red). Once a proper technical support is found, bitcoin moves into a re-accumulation phase (violet), potentially reaching towards six figures.
Source: Timo Oinonen, CryptoQuant
Bitcoin's realized price seems to be on a permanent growth angle, rising to $32,513.21. The realized price represents the average cost of all bitcoin purchases, indicating that the majority of bitcoin investors are significantly in profit. The confluence area between the realized price and Wyckoff accumulation structure remains as the main focal point.
Cumulative volume delta (CVD) currently mirrors growing demand among retail and large investor segments.
Source: Material Indicators
While bitcoin's dominance has been in a growth trajectory this year, rising 14.32 percent, its correlation to ether has been weakening in Q4. Ethereum's lack of performance seems to stem from weak investment narrative and escalating competition from protocols like Solana (SOL).
Source: 21metrics
Following the Power Law Theory
Bitcoin's recent price action can be explained by the power law model, developed by Harold Christopher Burger and Giovanni Santostasi. The power law is essentially a predictive model developed to forecast bitcoin's price trajectory.
The model fits in the same category with the law of diminishing returns, a principle stating that profits or benefits gained from something will represent a proportionally smaller gain as more money or energy is invested in it. Meaning that bitcoin will continue to appreciate over time, but with a calmer cyclical pace.
Source: 21metrics
The power law model is based on the following assumptions:
[A] Bitcoin is in a continuous long-term uptrend, but its rate of ascent decreases over time.
[B] Bitcoin’s volatility decreases over time.
[C] After 2028, the price of bitcoin will not fall below $100,000.
Institutional Growth
Profiled as the de facto leading Bitcoin institution, MicroStrategy (MSTR) employs a dollar-cost averaging (DCA) strategy in its purchases, but has a tendency to cyclically weight its purchase program.
The company's balance sheet has now reached 252,220 bitcoins, making it one of the world's largest holders of the asset.
When spot prices sharply declined back in 2022, the company's yearly purchases were modest at 8109 bitcoins, while in 2023 acquisitions rose to 56,650 units.
On an annual basis, the growth of MSTR's buying program from 2022 to 2023 was an impressive 599 percent. This year's purchases have climbed to 63,070 units, already exceeding last year's amount.
Aggregated with broader institutional demand, one could argue that bitcoin, at its current spot level, is undervalued. In the current market environment, MSTR's purchase program can be seen as a leading indicator to the underlying asset.
Source: 21metrics
Inspired by MicroStrategy's success story, other companies are following its modus operandi. The Japanese Metaplanet (3350) began its bitcoin accumulation in April 2024 with an initial purchase worth $6.5 million. By today, the company has grown its balance sheet to 861.4 bitcoin units, worth $58.8 million.
Although initially exploring a broader "Web3" or "crypto" pivot, Metaplanet has focused on adopting a full-scale bitcoin standard. This decision was influenced by bitcoin's perceived superiority as a currency and the desire to offer Japanese investors a tax-efficient way to gain bitcoin exposure.
Source: 21metrics
The market has reacted positively to Metaplanet's bitcoin strategy, with its stock price experiencing significant surges following announcements related to bitcoin investments. For instance, after its initial bitcoin purchase announcement, the stock price soared by nearly 90%.
Metaplanet's CEO Simon Gerovich has emphasized bitcoin's role as a hedge against yen (JPY) depreciation. The company aims not only to become the largest bitcoin holder among publicly traded companies in Asia but also to educate investors on bitcoin's unique attributes, setting a precedent for a broader corporate bitcoin adoption in Japan.
