Bitcoin is closing in on its previous all-time high, currently just 7% away, with analysts closely monitoring whether past trends will play out again.
A recent observation by Benjamin Cowen of Into The Cryptoverse suggests that if Bitcoin follows its previous pattern, bearish trends could dominate the scene. According to Cowen, monetary policy shifts are a critical factor to watch, particularly with Bitcoin’s historical behavior following rate cuts.
If #BTC continues to follow what it did last cycle (through the lens of monetary policy), then this scenario should at least be on your radar.
The monetary policy view is in stark contrast to the cyclical view of #BTC, where it normally goes up in Q4 of the halving year.… pic.twitter.com/XCRWgyMBQU
— Benjamin Cowen (@intocryptoverse) October 17, 2024
Dominance and Rate Cut Implications
Cowen highlights that the last cycle saw rate cuts around mid-2019, leading to notable changes in Bitcoin’s dominance and price trends. Specifically, Bitcoin’s dominance (BTC.D) reached a peak following the cuts, but this peak did not align with a higher high in prices, as it came when BTC hit lower highs.
After this, a correction ensued. This correction took Bitcoin down toward its 100-week Simple Moving Average (SMA). Notably, the recent 2024 rate cuts mirror those conditions, with Bitcoin’s price now approaching the dominance top of 60% despite BTC seeing lower highs. This similarity raises questions about whether the market will follow the same trajectory.
Potential Pullback Looms
For BTC to drop to the 100W SMA by the end of November or early December, it could first a hit 60% dominance peak on a lower high. However, Cowen notes that this view could be invalidated if Bitcoin breaks the lower high structure in October.
Per Cowen, while there is a possibility of a major rally thereafter that leaves Ethereum and other altcoins trailing, this potential scenario may not yet be on the radar for most market participants.
Further Monetary Indicators
Elsewhere, Bitcoin’s past performance during periods of monetary expansion further fuels interest in its current trajectory. A recent report from Ecoinometrics shows Bitcoin’s remarkable outperformance of traditional assets during the liquidity surge following the COVID-19 pandemic.
In 2020, when central banks injected trillions into the global economy, Bitcoin’s annual growth rate far exceeded that of major indices like the NASDAQ and safe-haven assets such as gold.
Current Situation and Potential
Although current economic conditions differ from the monetary expansion of 2020, the potential for another liquidity surge remains on the horizon. Governments have scaled back their money-printing activities, resulting in a period of relative price stability for Bitcoin.
However, looming fiscal challenges, including rising debt levels and deficits, suggest that central banks may again turn to monetary easing. Should this happen, Bitcoin could experience another significant price rally, outpacing traditional assets just as it did during the pandemic.
DisClamier: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
