Summary Every Bitcoin bear market has been triggered by a bearish reversal pattern, though not every bearish reversal pattern triggers a Bitcoin bear market. A (potentially) emerging bearish reversal pattern may prematurely trigger a bear market, potentially marking the current bull market as the shortest-ever bull market in Bitcoin history. In the short term, the emerging bearish reversal pattern could see Bitcoin retracing back to $75,000, but the 3-year outlook will turn bearish if it breaks below $74,000. Even so, we maintain our bull case $200,000 price target on the back of a potential US Bitcoin Strategic Reserve and Bitcoin's decade-old cyclical pattern while monitoring Bitcoin's price action. Introduction In January 2024, we publish our Bitcoin thesis for the entire 2024. Our thesis suggested we will see Bitcoin reaching at least $90,000 by April 2025 based on Bitcoin's decade-old cyclical price pattern. Looking back, we're glad about our thesis, and it aligned with Bitcoin's eventual price movement. On a more recent note (prior to the $70,000 breakout and the 2 key observations ), we looked into some of the biggest miners in the sector (namely CLSK, MARA, RIOT, IREN, and BITF) to tilt our portfolio from Bitcoin into Bitcoin miners. The intention is to outperform Bitcoin with the beta of Bitcoin miners. Once the 2 key observations occurred and Bitcoin broke above $70,000 , we tilted into CLSK and MARA as we perceive them to be the sector's best. Unfortunately, CLSK and MARA failed to outperform Bitcoin, and we consolidated all non-Bitcoin positions back to Bitcoin when Bitcoin reached our base case price target of $90,000 . The decision to consolidate our portfolio looked to be a wise choice, as both CLSK and MARA significantly underperformed Bitcoin (Fig 1). Currently, Bitcoin seems to be completing its breakout-retest formation as it broke and retested the $90,000 support level. This is good because this price action is within our expectation where we expect Bitcoin to retest the $90,000 support level rather than the $70,000 support level. However, a very concerning bearish reversal pattern might be emerging. The implication of this bearish reversal signal is significant because Bitcoin's bull market typically ends with a bearish reversal signal. This article represents our thesis on why it is more likely for a Bitcoin bull run to persist than for the bull to end. Furthermore, it is more likely for us to see Bitcoin reaching $130,000 and even $200,000 in 2025. This is our 2025 outlook. Fig 1. Bitcoin vs CLSK vs MARA Performance (Author) Addressing the Bearish Reversal Concerns The emerging head and shoulders pattern has 2 implications. The first implication is a potential short-term setup that does not change the broader Bitcoin outlook for the next 3 years, while the second implication has a long-term impact on Bitcoin's outlook for the next 3 years. The first implication of the emerging head and shoulders pattern is that we might see Bitcoin breaking below the $90,000 and retrace towards the $70,000 support level. The general interpretation of the head and shoulders pattern is that price will decline, at the same distance between the head and neckline ($19,000, Fig 2) below the neckline to $75,000. Fig 2. An Emerging Bearish Reversal Pattern in Bitcoin's 2024-2025 Bull market (Author) Based on Bitcoin's decade-old cyclical pattern, it is within the realm of possibility. While Bitcoin's past cycles indicate that it is unlikely for Bitcoin to revisit the price range of the first 180 days from the halving event (we call it the 'Phase 1' of the bull market), the Phase 1 price range only spans up to $74,000, which coincidently could serve as a very strong support for Bitcoin to rebound from. Since this is only a short-term setup, we see the rebound off the $75,000 support as a high, probably bullish trade where we aim to deploy our capital. We will never short Bitcoin, especially when it is in a bull market. The second implication is rather dire for Bitcoin. We initially published this finding back in 2021 where we made our mid-2021 projection for Bitcoin . We showed that Bitcoin's 2013 bear market was triggered by a double top formation after a 1-year 100x bull run (Fig 3). Then, the following 2018 bear market was triggered by a head and shoulders pattern (Fig 4) after a 1.5 years of a 32x bull run. The most recent 2021 bear market was triggered by both head and shoulders and a double top after 1.5 years of an 8x bull run. Fig 3. The bearish reversal pattern in Bitcoin's 2013 bear market (Author) Fig 4. The bearish reversal pattern in Bitcoin's 2018 bear market (Author) Fig 5. The bearish reversal pattern in Bitcoin's 2021 bear market (Author) Therefore, we must take a bearish stance IF this head and shoulders pattern indeed triggers a Bitcoin bear market. There are also another strong argument for a Bitcoin bear case: Bitcoin typically begins its bull market right in the middle (50%) of its preceding ATH price and the preceding bear market low. This would be $45,000. Based on the diminishing magnitude of each subsequent bull run, we extrapolate that the current bull market will only see a 2x-3x bull run. This implies that a base case price target of $90,000 and $135,000 respectively. (If we use the actual price of Bitcoin at the halving event, which is $65,000, the implied price targets would be $130,000 and $195,000. This is our bull case price targets). Now that Bitcoin has already achieved its minimum price target, we could see mounting downside pressure, thus supporting the bearish narrative. Hence, there is sufficient evidence to start giving Bitcoin a bear case scenario. Cautiously Bullish Should Be The Right Call We intentionally provided the length of the all preceding bull market in the previous section because this is where the mixed signal lies. Note that the bull market of the previous cycles is 1 year to 1.5 years, starting from the halving events. Since it has only been 8 months since the most recent halving event, it is not ripe for a bear market yet. Of course, we can't say that the current bull market will not Bitcoin's shortest ever bull market, either. Only time will tell whether it breaks above $109,000 or below $90,000 (Break below is bearish). Perhaps the primary catalyst that helped steer us away from Bitcoin's bearish outlook is President-elect Trump's US Bitcoin Strategic Reserve . From what we read, the US could be buying 200,000 Bitcoins (worth $20bn based on today's price) annually for the next 5 years until a stockpile of 1 million Bitcoins. Then, the reserves could be maintained for a minimum of 20 years. Here's why this is bullish: There will be consistent foreseeable demand for Bitcoin over the 5-year period. Bitcoin is legitimized by arguably the most powerful nation in the world. The resulting confidence will stir up even bigger demand from federal, institutional and retail players worldwide. Furthermore, Bitcoin skeptics and shorts that compare Bitcoin to Tulips will be forced to revisit their thesis and FOMO into Bitcoin, pushing Bitcoin further up. In addition, the legitimacy of Bitcoin also indirectly legitimizes altcoins and encourages the utility of the blockchain technology. President-elect Trump is going to be inaugurated this month, which provides us with sufficient time for Trump to act on his Bitcoin Strategic Reserve plan. If this is executed within Bitcoin's bull market, it is extremely bullish for Bitcoin. Whether or not the bill can be passed, the hype around this potential policy and Bitcoin's decade-old cyclical pattern may be enough to make the $200,000 price level a probable price target by October 2025. On the flip side, depending on the timing of events (near October 2025), if this strategic reserve fails to materialize (e.g. denied), it could be the trigger for the cyclical bear market that is expected to take place latest by October 2025 according to bitcoin's cyclical price pattern. Summary In short, our 2025 Bitcoin thesis takes a cautious yet bullish tone. We see a bearish setup forming much earlier than we anticipated (We expected minimal headwind at least until April 2025) and this article showed that the emerging reversal pattern could upset Bitcoin bulls like us. Right now, we are closely monitoring whether Bitcoin can complete its breakout-retest formation by breaking above $90,000, or whether Bitcoin will break below the $90,000 historic support level. Given the extremely bullish catalyst (The US Bitcoin strategic reserve), we still maintain our $200,000 bull case price target for 2025. At the very least, we expect Bitcoin to reach $130,000 By April 2025, which is coincidently the upper limit of the base case price target and the lower limit of the bull case price target. If Bitcoin retraces below $75,000, we'll most likely take a bearish stance because Bitcoin typically does not revisit the price ranges of the first 180 days of a bull market. It will break our bullish thesis if it does. Investors of Bitcoin mining companies should be extra cautious. For the next month or 2, we'll continue to experiment with different option strategies (e.g. selling decay, income, trading expected movement, etc). We will also update our Bitcoin mining sector outlook and look into other major players in the Bitcoin ecosystem. So stay tuned. As always, invest safe.
