Crypto market observers have recently noted a puzzling divergence: while traditional assets like gold and the stock market continue to surge, Bitcoin’s price has remained sluggish. Cryptocurrency analyst Matthew Hylan has weighed in on the situation, offering insights into why the world’s most prominent digital asset isn’t rallying alongside these traditionally bullish indicators.
Hylan points out that this kind of lag is not unprecedented. In fact, similar price behavior was observed during the summer of 2020. At that time, following the COVID-19 market crash, the S&P 500 rebounded strongly and gold soared past the $2,000 mark amid inflation fears. Bitcoin, in contrast, traded within a relatively narrow range between $9,000 and $12,000—still below its 2017 peak. However, that period turned out to be a crucial accumulation phase. By the end of 2020, Bitcoin had broken through to $20,000 and embarked on a parabolic bull run, eventually reaching an all-time high of $64,000 in 2021.
According to Hylan, a similar macroeconomic setup is playing out today. Gold has once again reached record highs, fueled by concerns over currency devaluation and geopolitical instability. Meanwhile, the S&P 500 continues to climb on the back of optimism around artificial intelligence and strong corporate earnings. Bitcoin, however, has been on a downward trend since reaching a new high above $126,000 in early October, raising questions about whether the crypto asset is falling behind or simply consolidating.
Despite bearish price action, some macroeconomic indicators appear favorable for Bitcoin. The recent 25 basis point interest rate cut by the Federal Reserve and the announcement that quantitative tightening will conclude by December could serve as catalysts by increasing market liquidity. Such policies typically benefit riskier assets, including cryptocurrencies.
Ali Martinez, another well-known crypto analyst, suggests that Bitcoin might not have reached its peak yet. He identified a ‘broadening top’ pattern in the charts, a technical formation that could lead to a short-term price surge before a significant correction. Martinez’s analysis implies that Bitcoin could flirt with the $130,000 mark before facing a potential steep reversal.
Adding another layer of insight, CryptoQuant founder Ki Young Ju offered a more nuanced perspective. He argued that the Bitcoin market remains healthy unless the widely accepted “four-year cycle theory” proves invalid. This theory suggests that Bitcoin’s price experiences significant peaks approximately every four years, often following the halving events. According to this model, Bitcoin should be topping out around this time. However, other experts like Bitwise CIO Matt Hougan believe the typical cycle has been disrupted, and the bull market may extend into the following year.
Currently, Bitcoin is trading around $107,800, showing a decline of just over 2% in the past 24 hours. While short-term sentiment appears mixed, long-term indicators and historical patterns suggest that Bitcoin may be in a transitional phase rather than a terminal decline.
Several other factors could be contributing to Bitcoin’s underperformance relative to gold and equities:
1. Regulatory Uncertainty: Continued ambiguity around cryptocurrency regulations in major markets like the United States and the European Union has likely dampened investor enthusiasm. Institutions may be hesitant to allocate capital to Bitcoin until clearer guidelines are established.
2. Market Rotation: With AI and tech stocks dominating headlines and investor portfolios, capital may be rotating away from crypto into these booming sectors, temporarily sidelining Bitcoin.
3. Profit-Taking and Long-Term Holder Behavior: On-chain data shows that long-term holders have begun distributing their coins. Though this isn’t necessarily a bearish sign, it does indicate that some investors are locking in profits after Bitcoin’s rally to $126,000.
4. Lack of Institutional Momentum: Despite increasing interest, institutional flows into Bitcoin have not matched the levels seen during previous bull markets. This could explain why Bitcoin is not keeping pace with more traditional assets.
5. Geopolitical Tensions: Bitcoin’s narrative as a “safe haven” asset is still under scrutiny. During periods of heightened geopolitical risks, investors may prefer assets with longer historical track records like gold.
6. ETF Developments: While spot Bitcoin ETFs have been approved in several jurisdictions, the U.S. Securities and Exchange Commission remains cautious. The absence of a fully regulated spot ETF in the U.S. may be delaying a broader wave of institutional adoption.
7. Mining Dynamics and Halving Anticipation: With the next Bitcoin halving expected in 2024, miners and investors alike are recalibrating their strategies. Some may be waiting for the halving to take effect before re-entering the market in full force.
In summary, while Bitcoin’s current price action might seem disappointing compared to traditional markets, historical context and macroeconomic indicators suggest that the cryptocurrency could still be setting the stage for its next major rally. Patience may be required, but if past patterns hold, Bitcoin could eventually follow—if not surpass—the gains seen in gold and equities.