Factors Driving Bitcoin’s Growth in the Coming Years

In the next one to two years, the leading cryptocurrency is expected to outperform “everything else” amidst improving liquidity conditions in the United States. This forecast was made by Michael Nadeau, an analyst at The DeFi Report.

He highlighted the volume of U.S. debt that will require refinancing this year, as well as market expectations for at least three rate cuts by the Fed.

“This should provide a tailwind for risk assets like tech stocks and quality cryptocurrencies,” Nadeau stated.

Among other favorable factors, he mentioned:

• approval of spot Bitcoin ETFs, which have simplified investor entry into the industry;
• the halving event in the Bitcoin network, historically leading to rallies due to reduced coin supply;
• a renewed cycle of venture investor interest in blockchain projects as the technology matures and scales.

According to the analyst, Bitcoin’s recent surge to new highs “could be a good omen for movement towards what looks like the second half of the current bull market.”

Nadeau also noted that typically, prices head towards a new bottom during prolonged periods when the cost of mining 1 BTC exceeds the spot price. Currently, these figures are ~$42,000 and ~$64,000 respectively, and miners can sustain operations without selling reserves.

Do Bitcoin and Ethereum Correlate in Cycles?

Regarding the correlation between the two leading cryptocurrencies by market capitalization, the analyst emphasized that it exists, but with its own characteristics:

• in the first phase of a bull rally, Bitcoin leads in growth and “guides” the market;
• in the second stage, there is a trend of Ethereum and other altcoins “taking over” leadership.

According to Nadeau, this is due to the recognition of digital gold, which new investors focus on first. They then start looking for other, more profitable options.

“Notably, over the last two cycles, altcoins have grown so much that they have outperformed Bitcoin in both cases,” the analyst added.

He suggested that the trend will continue, but only for coins that meet “market expectations as a product.” In his view, these include Ethereum, assets from several DeFi protocols, and infrastructure projects, including those from the Solana ecosystem.

Long-term Expectations for Bitcoin Remain High

Former BitMEX CEO Arthur Hayes suggested in early April that in the short term, Bitcoin might fall due to liquidity issues in the market. He linked this to the U.S. tax season, as well as Fed and Treasury policies.

In the long term, the expert acknowledged the halving as a historically bullish catalyst for the leading cryptocurrency.

Fred Thiel, CEO of mining company Marathon, expressed the view that the reduction in block rewards is largely priced into Bitcoin. He believes the event will not significantly impact prices.

Analyst Benjamin Cowen suggested a potential drop in cryptocurrency prices post-halving. The host of the YouTube channel Into The Cryptoverse extrapolated price behavior during the launch of spot Bitcoin ETFs in January. However, he acknowledged that this is one of the likely scenarios, as such patterns generally do not repeat.

If #BTC repeats the pattern that it had going into the spot ETF as it goes into the halving, then it would look something like this.

Usually these patterns do not repeat exactly, but just showing it here in case something similar happens once again. pic.twitter.com/GNiy2IDRs9

— Benjamin Cowen (@intocryptoverse) April 8, 2024

Specialists at JPMorgan reached a similar conclusion based on an analysis of open interest in futures. They assess the asset as being in an overbought state.

Michael van de Poppe, founder of MN Trading, suggested that Bitcoin might test a new high if it holds the $69,000 mark.

Should it fall below $59,000, the market risks entering a bearish phase, according to CMCC Crest co-founder Willy Woo.