Bitcoin Has Reached the End of the 4-Year Cycle: What’s Next?

That's it, guys. We are nearing the end of bitcoin's traditional four year cycle and that usually means one thing. That we should brace for one final blow off top, followed by a brutal market crash. However, not everyone agrees with that outlook.

There's been an enormous amount of selling of bitcoin this year, particularly by older coins. I think the bull market is structurally intact, but it's at risk. Bitcoin's kind of at a pivot point here.

So what if bitcoin has already topped and how severe could the next bear market be? When it comes to answer questions, we sat down with Alex Thorne, head of research at Galaxy Digital before we get started. As always, this video should not be considered financial advice. It's just our guest assessment of the bitcoin market. Let's get into it. So first question would be a prediction that you made in December 2024. You said that Bitcoin had the potential to reach $185,000 by the end of 2025. Do you still think that's possible?

I think it's probably unlikely. I think something in the range of 130 to maybe 150 on a bull case upside would be more likely at this point with only two and a half months left until the end of the year. You know, bitcoin's kind of at a pivot point here. It where it, you know, as we record it's about $109,000 but it sort of below 107 starts to raise fears of sub 100 and maybe below 118 says new all time highs are back in play and really quite an indecisive space right here like the 109 range. Something has to be decided. But I think 185 is too optimistic for the end of the year. At this point.

When we saw this big crash on 10 October, which was the biggest liquidation event in crypto history, you came out with a post when you were saying that, yeah, it was a massive liquidation event, but the fundamental structure of the bull market was intact. On the other hand, now you are saying that bitcoin is at a pivotal moment. How can these two statements coincide?

I think the bull market is structurally intact, but it's at risk. I think at these levels, I think if you look at things like short term holder cost basis or the realized cap of bitcoin, something like, you know, my friend James Check has pointed this out, something like 60 plus percent of all the money ever invested in bitcoin was now done. So over the price of 95,000. So what I'm really saying is like, you know, any material, material further decline starts to put like that would put more than half the network underwater in terms of ownership if it were to get down to 95k. Just 95k. This is actually a very bullish statement. People have bought a lot of bitcoin at this levels and higher and people like that price over 100k. If you were to lose 100k now, I think it would create a lot of anxiety that could put that structural bull market in jeopardy. I think also a lot of the point in my post following October 10th was also about the anxiety in the markets about particularly the Equity Markets, about AI CapEx spend and whether this giant amount of money that hyperscalers and Mag 7 companies are putting into building out data centers and energy projects to service AI, how long can that continue? And is it like the pre.com period that led ultimately to that bubble? I argued that it's not. Well, I mean it is in some ways, but that actually the government interest, both from the US government and governments around the world in AI looks a lot more like a space race or Manhattan Project than sort of the education driven rollout of the Internet in the 90s. And actually governments are spending significantly more money on AI subsidies, grants, incentives, et cetera than they did on the Internet then, both relative to national budgets and to gdp. So that's an important part of this story because the AI equity trade is driving risk markets generally and sort of has the risk appetite of risk investors right there in its, in its grasp. And so, you know, any kind of like feeling that AI is topped or is a bubble could, could negatively affect all markets. And I, and I do think, you know, nothing about Bitcoin's drop, whether on October 10th or anytime recently has been fundamental about Bitcoin. It's really trading like a macro asset and it is very susceptible to things like anxiety in equity markets. And I think that's what's driving it. If it does, you know, drop below 100k, it won't be because of anxiety about Bitcoin, it'll be because of macro factors.

Wanted to touch upon what you said regarding what James Czech said. He sees like a base that is absorbing this massive selling that we, that we have been seeing in the last few days. So according to him, that's a bullish sign that do you see the same thing happening?

Yeah, I mean there's been an enormous amount of selling of Bitcoin this year, particularly by older coins, an Enormous amount. Which is, which is normal and healthy, right? But you know, the other side of the coin there, so to speak, is that for every sale there's a buyer and an enormous amount of bitcoin has been bought at these high, higher prices. Which is, which is absolutely bullish. It is the sort of institutionalization and the normalization of bitcoin at these levels, right? People want Bitcoin at 109k, they've been buying it there. That's great. And so for all of that whale selling, it's being bought by someone. And the fact that say like an OG can sell 80,000 bitcoin and the bitcoin's liquid enough to support a $10 billion sale is incredibly bullish. And it's totally right about the bitcoin markets. And there are a lot of reasons who is buying those coins, right? It's the ETFs, it's advisors, it's institutions that we're sort of entering this post 100k era where you're not quite early. The days of a cypherpunk mining bitcoin and making 10, 100 a thousand X on Bitcoin are probably over. Instead now you have this staircase, the growing passive bid for bitcoin. Morgan Stanley, one of the largest wirehouses in the world, just announced that they're allowing their registered investment advisors, of whom they have like 10,000 to recommend in portfolios, inclined portfolios of bitcoin allocation up to 4%. That's incredibly bullish. This is probably what the new character of bitcoin ownership is going to look like, right? It's going to be more institutional, more passive, possibly more custodial. There's a lot of demand for bitcoin at these levels and bitcoin doesn't stay ambivalent for very long typically. So it's more when I say it's a pivot point, it's more like typically some decision in bitcoin price is going to occur one way or another when it's sort of in these ranges for so long, right? And so that's what I'm anticipating. I think it's, I'm bullish bias here. I think it's likely to go up again and test all time highs again this year. But again, if we see say like new big negative tariff headlines that could impact it. Anything in equity market material squishiness in equity markets could impact it to the downside, right? It is now in global institutional portfolios and those portfolios trade on macro and the macro.

With Donald Trump leading the United States is more chaotic than it used to. I think from what you have been saying, it seems that I kind of know the answer already. But I wanted to ask you this question. Do you still believe that the four year cycle is in place?

I don't, I don't believe that. I think if you look, just look at bitcoin price, right? Like 2017, huge blow off top, huge trough. In 2018, 2021, huge blow off tops, huge drawdowns. But now if you look at the price since November 2022, it's pretty much just a slow grind staircase higher. Sure there's volatility in the middle, but I challenge people to actually interrogate the price chart. It doesn't look anything like those prior cycles. It literally looks different. I think whether the four year cycle had been driven by the bitcoin halving events or by global liquidity or the business cycle, it's not clear. I think it definitely in later cycles and going forward will not be materially impacted by the halving, which is so small a reduction now relative to Bitcoin's float that it can't be that impactful from a pure supply side dynamic. But also it just feels different. It feels like this is sort of, I'm saying about the sort of pre $100k era and post 100k era, you're not really quite early to an asset when Morgan Stanley starts recommending a 4% allocation to it and all its client portfolios, okay, like this is now a mature asset and it's going to trade differently than sort of an early stage growth asset.

You think that this blow off top that we saw in past bull markets won't happen. And I also believe so because as you said, the trend seems to be much more gradual. So what I think is that if we're going to see a bear market in a couple of months, it's also going to be far less severe and more mild. Would you agree?

Yeah, I think that's right. I mean I think even a drop to 95k would be 25% from all time high. I mean that's mild by bitcoin comparisons, right? Which prior bitcoin markets and cycles have been characterized by 70, 80, 90% drawdowns. Right? I just don't think that's, that's really in the cards here at all. But yes, it's sort of, you know, you create the bear market that you deserve from the bull market when you have, take gold for example. Gold came down what, almost 10, 10 plus percent from ITS, you know, peak earlier this week. People are saying it's the biggest drop since 2013. Well, yeah, it went vertical though. Right. So if bitcoin's not gonna go vertical and have a crazy 2017 style blow off, top is probably also not going to drop 90%. Those drops came because of really massive short term moves higher. And instead when you're grinding and you're establishing the realized cap is over a trillion dollars. Now for bitcoin, an enormous amount of money, like I said, has been bought. Bitcoin has been bought at scale above 100k. Right. That is a sign that the world is agree that the fair price for a bitcoin is at that level or near that level. It's not like in 2017 the price is like $8,000 and three days later it was 20. Right. Like there was no time to establish and normalize bitcoin trading at 15k to then provide support when it then came down. Right. So we're building a stronger base characterized by lower realized volatility, more institutional ownership. Right. And slower passive accumulation. I think that's positive.

Thanks, Alex. That was a great conversation. And yeah, let's see how it goes. It will be interesting to see next year how this will play out. And yeah, I hope to see you soon again on our show.

All right. Thank you, Giovanni. Appreciate it.

Sam.