When the Market Fluctuates, Bitcoin Rises. Here Is What Could Happen Next

A completely unexpected event occurred with Bitcoin (CRYPTO: BTC) in April. After a sharp fall in February and March, this cryptocurrency suddenly surged and has now increased by 15% in the past 30 days. For Bitcoin investors, the big question is whether this small price increase will last until 2025 or will it fade away when the new tax levels actually come into effect. With that in mind, here is a look at the possible scenarios for Bitcoin this year. The bullish scenario for Bitcoin Let's start with the bullish scenario for Bitcoin. This scenario assumes that the worst of the tariff situation is behind us. If you believe the message from the White House, trade deals with India, Japan, and South Korea could be forthcoming soon. This would set the stage for some kind of major reconciliation with China and a series of other trade agreements around the world. Once that happens, Bitcoin may enter the race. Since February, Bitcoin has struggled to regain the $100,000 level. However, with increased optimism about U.S. economic growth this year, risk-averse investors may start flocking to cryptocurrency, which could lead to Bitcoin soaring to an all-time high. The two main variables here are the cash flow of the Bitcoin spot ETF and the general sentiment of investors, measured by the Crypto Fear & Greed Index. Overall, we need to see the cash flow of the Bitcoin ETF surge and the Crypto Fear & Greed Index ( measured on a scale from 0-100) rise to 80 or higher, as after the elections. So far, that hasn't happened. For example, the Fear & Greed Index is currently at 51, which is almost the most neutral level you can achieve. Price fall scenario for Bitcoin In the worst-case scenario, all the talk about new trade agreements turns out to be an illusion. Consumer confidence weakens, economic growth slows down, empty shelves begin to appear, prices skyrocket, and people start talking about the "R" (recession). In this context, Bitcoin still has the potential to increase in value. However, this will only happen if investors begin to lose faith in the US dollar and start transferring their money into Bitcoin as a potential safe-haven asset. Investors have started to refer to Bitcoin as "digital gold." If the economic situation deteriorates significantly, the Federal Reserve may need to intervene and lower interest rates to provide a much-needed stimulus. Traditionally, lowering interest rates benefits cryptocurrencies, and this could also help push Bitcoin higher. Therefore, even in a bearish scenario, Bitcoin can still increase in price. The key variable to monitor here is the performance of Bitcoin compared to gold. This will be the best indicator of whether investors are truly starting to view Bitcoin as "digital gold". Theoretically, the performance gap between gold and Bitcoin will begin to narrow by 2025. If gold continues to reach new all-time highs, then Bitcoin will also start to reach new all-time highs. Where are we in the Bitcoin cycle? So far, I have primarily focused on macroeconomic factors and how they affect investor sentiment regarding Bitcoin. But it is also important to take into account the historical performance of Bitcoin, which tends to follow a fairly predictable four-year cycle, marked by periods of boom and bust. Although it may be more of an art than a science to figure out where we are in any Bitcoin cycle, commonly speaking, the starting point of any "boom" phase is the date of the most recent Bitcoin halving. In this case, the most recent halving occurred in April 2024. Depending on who you talk to, the "boom" phase following any halving lasts from 12 to 18 months. So, let's do some mental calculations. If we use April 2024 as the starting date of the "boom" phase and then assume a particularly strong boom phase lasting 18 months, we will reach October. For the sake of argument, let's assume there is an additional "Trump pump" for Bitcoin. That would take us to November. So far, everything has been fine. But do you remember what happened four years ago, in November 2021? That's right, Bitcoin reached an all-time high of $69,000 and seemed to be heading to the moon. No one thought the crypto party would end. But it did. The price of Bitcoin fell 65% in 2022 and the term "crypto winter" became a popular term. Is this time different? Of course, there will be people who say, "This time is different." After all, a spot Bitcoin ETF did not exist in 2021. There were no strategic Bitcoin reserve funds in 2021. Large institutional investors did not rush into Bitcoin like they do now. I understand that. The feeling is different, especially with the support of the Trump administration for cryptocurrency. But take the risk of ignoring history. If history is any guide, the four-year Bitcoin cycle will soon come to an end, and it won't matter how many trade agreements the White House signs or how much the Fed cuts interest rates. If you are buying Bitcoin right now, make sure you are prepared for future volatility and ready to hold for at least four years.