Why Bitcoin’s Bull Run May Be Nearing a Top Despite Pro-Crypto Tailwinds

Since December of 2022, when Bitcoin was trading in the $16,000 region, we went against the crowd and called for a new bull cycle. Since that report, we released seven additional articles, confirming Bitcoin as a buy, and even sent out 13 buy alerts to our premium members at key spots between $25,000 and up to $60,000.

What separates our firm is the ability to follow our process regardless of the market’s emotions around extreme lows as well as highs. For example, in our last Bitcoin article in October of 2024, titled “Bitcoin Bull Market Intact as Risk Increases,” we started to shift our tone to a more cautious stance than prior reports. 

“While we still believe the original price targets of $106,000 – $190,000 are attainable, we do believe risk has increased. As a result, we will likely reduce some risk on the next rally to all-time highs.”  

At the time, Bitcoin was trading in the $70,000 region and had not yet broken out over its March high of $73,835. It was dead money for most of 2024, and not a topic of interest. At the time of our October report, it was down nearly 5% from its March high, while the tech focused NASDAQ-100 was up nearly 12% in the same time frame. Yet, our research was firm that Bitcoin had at least one more swing to the $82,000 – $106,000 region.

In early November, Bitcoin jumped nearly 50% in just over 2 months to a new high of $109,354, which was just over our $106,000 target. As stated, we used that move to reduce our position by 50%, as we maintained a cautious stance due to mounting risk.

This cautious approach stems from technical indicators suggesting the current rally is likely in its final stage. While both on chain and technical analysis support another push higher, if we do get this swing, it will likely be the final push higher before a period of prolonged volatility begins.

This is a contrarian opinion, as the narrative around Bitcoin is quite positive right now. 

However, when we look back at the history of Bitcoin, narrative-based optimism has historically marked major tops, not sustainable breakouts. As such, we emphasize disciplined risk management and view sentiment extremes as a cue to protect gains, not chase headlines.

The Hidden Risk of Following Bitcoin News Headlines

Regarding equities, investors can lean into fundamental analysis to identify what to buy and sell, such as the growth rate of a company compared to competitors, do key metrics support sustained growth, is there operational efficiency, and is there a path to profitability? These are all questions that must be answered to justify the quality of a stock.

Regarding Bitcoin, there is no management team or earnings calls to guide investment decisions. For this reason, investors tend to lean into news events and narratives to guide investment decisions. There is an obvious logic around this strategy, which we are witnessing in real-time. The current narrative surrounding Bitcoin is quite bullish. Just in the last few months, we have seen:

• The U.S. government announced a Strategic Crypto Reserve. Regarding Bitcoin, they will retain all seized Bitcoin, which is valued at approximately $20 billion. 
• Several petty SEC Lawsuits have been dismissed. 
• New  leadership at CFTC and SEC that are supportive of digital assets.   
• Progressive bills being introduced, like FIT21 and the Bitcoin Act.

Thematic investing suggests that these developments are tailwinds for Bitcoin that should support higher prices from here. However, if we look at history, Bitcoin has an uncanny inclination to do the opposite of what the news-based narrative at the time suggests. In other words, it likes to top on bullish news and bottom on bearish news.  

• December 10th, 2017 – CBOE launches first Bitcoin futures. It was believed that this marked a new era in Bitcoin, opening easy access to Wall Street. One year later, Bitcoin was -83% lower. 
• November/December of 2018 – Three of the world’s largest Bitcoin miners file for bankruptcy due to Bitcoin’s price going below mining cost. The narrative that followed is that Bitcoin’s network would be altered and never fully return. One year later, Bitcoin was approximately +150% higher. 
• February 9th, 2021 – Elon Musk announces that Tesla has added $1.5 Billion in Bitcoin to its balance sheet and sets out plans to accept Bitcoin for payments. It was believed that institutions and companies would follow, creating growing demand. One year later, Bitcoin was approximately -40% lower. 
• September 7th, 2021 – El Salvador is the 1st country to accept Bitcoin as legal tender. It provides free Bitcoin wallets to its citizens and establishes plans to mine Bitcoin using geothermal heat from active volcanoes. It was believed that demand would only grow, as more countries followed along. One year later, Bitcoin was down -61%. 
• November 11th, 2022 – The world’s 3rd largest crypto exchange, FTX, files for bankruptcy, after allegations of extensive fraud led to insolvency. It was believed that this scandal would keep investors away from Bitcoin for years to come. One year later, Bitcoin was up +510%. Notably, this was around the time our firm stated Bitcoin would start to rally again.

Thematic investing certainly has its benefits, and the I/O Fund uses it as one of many blended techniques. However, when used alone, it instills too much confidence and can be detrimental – especially with crypto.

Instead, we have found technical analysis and on-chain analysis to be the most effective methods for successfully participating in Bitcoin’s meteoric rise, while also mitigating the inevitable volatility.

Decoding Bitcoin’s Price Moves Through Technical Analysis

If an investor cannot lean into fundamental analysis with Bitcoin, and narratives do not affect the price swings of Bitcoin, investors are left with two assumptions: 1) the price swings are random and have no logic to them; 2) there is a logic behind these swings, which can be deciphered and navigated.

When viewed through the lens of technical analysis, it becomes apparent that the latter is true. What tends to drive Bitcoin price actions is sentiment, which technical analysis is designed to address. Sentiment is simply analyzing herd mentality, which manifests in repeatable patterns.

Regarding the current sentiment pattern in play, Bitcoin has been tracing a large degree 5-wave pattern off the 2022 low, and we have either completed the final 5th wave or have one more swing higher to complete the 5th wave.

In a 5-wave pattern, the 3rd wave is the most powerful part of the trend. It is the moment when everyone realizes at once the direction of the trend – shorts cover at the same time while longs panic buy. This causes a vertical move in price and tends to coincide with peak volume expansion and momentum.

The 5th wave is for those who missed out and think that the trend is just starting. It is the riskiest part of the trend and should only be bought with an established exit plan – i.e., brief to intermediate trade. Here, we tend to see price make a higher high, but on lower volume and lower momentum.

If you look below, this is exactly what we are seeing in Bitcoin’s current price trend.  

The period from October 2023 – March of 2024 is when price went vertical. It’s also the period where we saw max volume and max momentum. This is the 3rd wave.  

Now, look at the most recent move to new highs. This was made on lower volume and lower momentum, confirming that we are in the final stage of the bull cycle that started in 2022. Once again, this analysis runs contrary to the bullish narratives surrounding Bitcoin currently, suggesting that we are closer to a meaningful top than low.

Bitcoin Price Forecast: Three Potential Outcomes

In our last report, we stated that the 5-wave pattern off the 2022 low was “incomplete until we push to new all-time highs,” meaning that the odds were high that we’d see a push higher. Now that we made this push to new highs, we have the minimal waves in place to constitute the larger uptrend is complete.

This scenario is outlined in Red in the chart below.   

Here, the push to $109,354 was the final 5th wave, providing us with the minimum number of waves needed to satisfy a full 5-wave pattern. This scenario would see Bitcoin fail below $102,000 and then turn lower toward the $60,000 region. We would then make a series of lower highs into 2026, until we see the final flush. This scenario would be an accelerated push into our long-term buy-and-hold targets, which we have been discussing in our premium service for several months.

While I do not think this outcome is the most probable given the price action, it still must be respected, which is why it is on my chart. In the years that I have provided free Bitcoin analysis; this report is the first one where I can present a fully formed and completed 5-wave pattern off the 2022 low. For this reason, we are more focused on risk management at this stage of the game, as any long attempts will come with stops and overhead targets where we will take gains.

The two scenarios that I believe are most likely are outlined in Green and Blue.

• Green – We are in the final 5th wave. We need to breakout over $102,000 and then break above $109, 354. In this scenario, our targets are at least $120,000. We would use this move to reduce most of our position.

  If this scenario is going to play out, any further weakness that we see needs to hold over $79,900. Below here and here and we will shift into the below scenario.

• Blue – This count mimics the Red one presented above for the next move lower. Both counts will fail under the $102,000 region, then head toward the $60,000 region. Where this scenario differs from the Red one is that from the $60,000 region Bitcoin will setup for the final 5th wave to the $120,000+ region. 

Onchain Analysis

Though Bitcoin does not provide classical fundamental analysis, it does have its own unique brand of internal dynamics called onchain analysis. What this type of analysis does is examine the blockchain  data to better understand transaction patterns, asset movements, and network health.

It is a relatively new brand of crypto analysis, which we find helpful in helping us better risk manage our position. When it comes to onchain analysis, we favor the work of WealthUmbrella, who has done some comprehensive and remarkable work in this field. The below comments are from Vincent Duchaine of WealthUmbrella.

Since late December of 2024, our stance has remained that Bitcoin likely will see higher prices before confirming a cyclical top.  This lines up best with I/O Fund’s Green and Blue scenarios presented above.

Our analysis suggests that we are in a prolonged correction within the ongoing bull market that began with the November 2022 low. This is reinforced by our three Market Top indicators, each of which analyzes a different aspect of the Bitcoin blockchain ecosystem. These indicators are adjusted to account for Bitcoin’s structural evolution over time, and none have reached levels that typically align with a major cycle peak. 

This view is further reinforced by our primary Overbought/Oversold Indicator, which is designed to flag probable highs and lows at any stage of a trend, not just at major tops or bottoms.

During the recent pullback, this indicator bottomed within the zone where corrections have found a low in the past. What is key, is that at no point did this indicator break into the levels that we see during more severe periods of volatility, like 2021 – 2022, suggesting this is only a correction. 

Regarding supply and demand dynamics, the flows that we track support the April 7th low holding, for now. However, we’re not currently seeing the kind of supply-demand undercurrents that would point to an imminent breakout to new all-time highs. Considering this, we view the current supply/demand dynamics to be healthy, and typical of what we see prior to a breakout higher.

A few examples of these healthy supply/demand dynamics are listed below:

• The number of newly created addresses with a non-zero starting balance. This metric measures new interest in Bitcoin. It dropped considerably once the option to invest in ETFs hit the market; however, it has been steadily moving higher while Bitcoin remains in a correction.  

This suggests that investors’ interest in Bitcoin continues to remain stable, regardless of the current volatility in price. Even more encouraging, as shown in the chart above, the current rate of new address creation is on average 25% higher than last summer’s low, with even the weakest reading during the recent “tariff” sell-off still sitting 17% above that baseline.

• The percentage of coins that have not moved in over a year. This metric measures the behaviors of long-term holders of Bitcoin. It began moving higher in mid-February, suggesting accumulation. This led to a sharp rise in the percentage of coins that haven’t moved in over a year—from 61.7% to 63.61%—by April 2nd.  

• ETF flows. The current flows in the existing ETFs are not currently in a favorable posture. Bitcoin ETFs were a major driving force behind the price surge in early 2024, but they also contributed significantly to the choppy conditions that emerged around the start of the year. In fact, the first three months of 2024 saw the worst daily outflows in the short history of these ETFs, as illustrated in the chart below: 

However, these outflows peaked on March 10th, coinciding with Bitcoin’s initial attempt to bottom. Since then, outflows have meaningfully subsided, settling into neutral territory around zero net flow, and then shifting into meaningful inflows starting April 21st: 

Conclusion:

In conclusion, while the narratives around Bitcoin support higher prices, history has shown that investing in Bitcoin without risk management can be painful. Bitcoin tends to do the opposite of what the narratives suggest at major turning points. To better prepare for the immense volatility in crypto, we lean into our process of analyzing sentiment through technical analysis and shifting our risk profile based on where we are in the uptrend.

Whether we hold the April 7th low, or see one more drop to the $60,000 range, we believe Bitcoin still has another move higher. This is supported by the onchain analysis provided by WealthUmbrella, who lines up with our two bullish scenarios. While odds support this rally, considering it will be the final 5th wave in this multi-year bull cycle, we will use it to reduce risk further, locking in well-deserved gains, and raising cash for lower prices.

📈 If you are sitting on outsized gains in Bitcoin with no risk management plan, or interested in our long-term buy for Bitcoin, then we encourage you to join us this Thursday, May 15h at 4:30 PM EST for a premium webinar. We will discuss where we see the crypto market going, our targets for the last swing higher in the current bull cycle, and where we believe the next bull cycle will begin. 👉 Sign up here

Please note: The I/O Fund conducts research and draws conclusions for the Fund’s positions. We then share that information with our readers. This is not a guarantee of a stock’s performance. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis.

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