Summary Bitcoin has fulfilled the 2 conditions that signaled massive moves toward new ATHs in all past halving cycles. Our thesis suggests minimal Bitcoin headwind until April 2025, then gradual downward pressure through October 2025 before entering a bear market. We maintain our $100,000 base case price targets while positioning for a potential $200,000 Bitcoin. Our current strategy involves tilting our Bitcoin portfolio into CLSK and MARA, then look for opportunity to short put options when Bitcoin hits $100,000 before April 2025. Introduction In our previous thesis , we identified 2 key observations that always accompany a Bitcoin ( BTC-USD ) bull run towards a new all-time high ('ATH'). We first identified a time variable that suggests that Bitcoin's bull run towards an ATH typically occurs roughly 5 to 6 months after the halving event. For this cycle, that would fall between 27th September 2024 and 17th October 2024. The second observation identified is a trend-following indicator used to track market cycles, which is known as the Coppock Curve. This indicator typically turns positive prior to Bitcoin's bull run toward a new ATH. These 2 observations have been consistent since Bitcoin's inception and are still valid as shown in Figure 1. Fig 1. Coppock Curve and Bitcoin's Bull Run (Author) Over the past 2 months, my team and I've gone through major Bitcoin mining companies to examine which has the best fundamentals to beat Bitcoin and the Bitcoin mining sector. The intention was to try to time the market by tilting our Bitcoin holdings into the best of Bitcoin mining companies to amplify returns. What we aim to replicate are our account-doubling plays in the 2020-2024 halving cycle. On one occasion, we found BITF to lag the sector and we issued a "Strong Buy' rating at $4.21, with a target price of $8.50 . In addition, we also suggested shorting call options to amplify returns at $8.50. The overall maneuver netted us more than 100% return. On another occasion, we found CLSK to be lagging the sector with a 200% upside which was later realized in half a year. This play also netted us about 100% return. You can read our current findings on each major Bitcoin mining company here below: CleanSpark ( CLSK ): here Marathon Digital Holdings ( MARA ): here Iris Energy ( IREN ): here Riot Platforms ( RIOT ): here Bitfarms ( BITF ): here TLDR: We found CLSK and MARA to be favorable. The working hypothesis for these outstanding plays is that we were able to find the alpha of Bitcoin mining companies through fundamentals and trade their Betas, both with respect to our Bitcoin outlook. Therefore, our Bitcoin outlook is the cornerstone of our entire investment strategy. In this article, we're going to update our thesis and discuss the latest development in the Bitcoin Halving Cycle. We'll also discuss what we expect for the next 12-month period and detail our action plans. Latest and Expected Future Development in The Bitcoin Halving Cycle The latest development in Bitcoin price action saw Bitcoin heading in our expected direction with a 14% price increase since our last coverage 2 months ago. As of the time of writing, we can say that Bitcoin has fulfilled the 2 criteria for us to expect a bull run to $100,000. During the past 2 months, the Coppock Curve has finally turned positive on the weekly chart, while the Bitcoin price nearly hit $70k (about $69,400) (Fig 2) within the 6 months after the halving event. These events suggest that stage 1 of the Bitcoin bull market is officially concluded and we're now in the 2nd stage of the bull market. This is a very bullish development for Bitcoin. ( Recall that stage 1 of the bull market is where Bitcoin reclaims previous ATHs (usually 5-6 months after the halving event), while stage 2 of the bull market is where Bitcoin hits new ATHs) Fig 2. Coppock Curve Turned Positive and Bitcoin Heading to ATH. (Author) So what should we expect in this 2nd stage of Bitcoin's bull run? Firstly, we expect this bull run to last until October 2025, which is about 1 year from now. This observation is based on the lengthening of Bitcoin's bull run over each Halving cycle (Fig 3). During the 2012-2016 halving cycle, Bitcoin's bull run lasted about a year, from November 2012 (Bitcoin's first halving event) to November 2013. During the following 2016-2020 halving cycle, the duration of Bitcoin's bull run increased from 1 year to 1.5 years, from July 2016 to Dec 2017. During the previous 2020-2024 halving cycle, the duration of Bitcoin's bull run remained at about 1.5 years, from May 2020 to about November 2021. Fig 3. The Duration of Bitcoin's Bull Market During Each Halving Cycle. (Author) Secondly, we expect Bitcoin to provide a 2x-3x upside within this 1 year. This is based on the diminishing return observed over past bull cycles. During the 2012-2016 cycle, Bitcoin returned 100x (from $12 to $12,000) within 1 year of the Bitcoin halving cycle. However, Bitcoin's return in the following 2016-2020 cycle was reduced from 100x to 32x (from ~$660 to $19,000) and was further reduced to 8x (from $9,000 to $69,000) in the following 2020-2024 cycle. Extrapolating this on a linear scale suggests only a 2x-3x return for the current cycle. Unfortunately, even if we know the magnitude of Bitcoin's bull run, the price target varies widely based on the assumed base price. The 1st possible base price is the 50% price level between the high of the bull market and the low of the bear market of the previous halving cycle (Fig 2). The 2016-2020 bull market started at about $660 per Bitcoin, which is 50% between the high of the bull run (~$1,150) and the low of the bear market (~$200) in the 2012-2016 cycle. The 2020-2024 bull market kicked off at ~$9,000, which is also about 50% between the high of the bull run (~$19,000) and the low of the bear market (~$3,200) in the 2016-2020 cycle. Hence, the base price for the current bull market would be $42,500 (= [$69,000+16,000]/2). A 2x-3x return implies a Bitcoin price target between $85,000 to $127,500. This price target range is also supported by the decade-old resistance (at ~$90,000) that was never broken but will eventually be broken . ... as credible as this Bitcoin Halving Cycle could get, this cycle could be its last as this thesis can only project up to $90,000 (the resistance level). On aggregate, we set our base case price target to be $100,000, which also accounts for the psychology of whole numbers, or " parity " in FOREX, which is significant. The 2nd possible base price is $65,000, which is the actual Bitcoin price entering the current bull market. Based on this base price, our bull case price targets see Bitcoin reaching as high as $130,000 (if 2x) to $195,000 (if 3x; rounded to $200,000 for parity and psychology of whole numbers). The risk to the validity of this $65,000 base price is that it might've been nothing more than a 'side-effect' of Bitcoin's historic spot ETF approval where Bitcoin price appreciated earlier than in the past. Only time will tell which is the correct base price. Nevertheless, both base prices result in highly bullish price targets for Bitcoin, and it is also possible to be conservative while positioning for the potential bull case scenario. Our Action Plan We expect Bitcoin to comfortably reach $100,000 with minimal headwind before April 2025 (not October 2025). This marks the minimum duration of a Bitcoin bull market over the past decade. Hence, we've executed our strategy to tilt our Bitcoin portfolio into Bitcoin mining companies to trade the Beta. In light of this updated thesis, we've also adjusted our strategy to position ourselves for the possibility of Bitcoin reaching $200,000. Right now, we've tilted our Bitcoin portfolio into CLSK and MARA. CLSK remains our top choice as it offers the highest upside and the most undervalued in the sector based on Implied Bitcoin Price. In addition, We also picked MARA as for a mean reversion play . So far, CLSK performed the best, followed closely by RIOT, and then MARA. You can read why we chose to forgo RIOT even though it is trading at a significant discount on Price-to-Book ratio ('PBR') here . Data by YCharts If Bitcoin reaches $90,000 as we expect, we'll consolidate the portfolio back to 100% Bitcoin by selling all Bitcoin mining companies. This aligns with our stance to be conservative. The adjustment of our strategy is to also short in-the-money put options on Bitcoin mining companies (yet to be determined, depending on valuations and fundamentals at that time) and use the collected premiums to increase the Bitcoin holdings. This will help us position ourselves for further Bitcoin price appreciation while retaining our conservativeness. However, this adjustment is contingent on the timing of Bitcoin hitting $90,000. We have to assess whether the risk to earn the time value is justified. For instance, if Bitcoin hits $90,000 3 months before April 2025, it's very likely for us to execute this trade. After that, we'll start to prepare for the bear market. Conclusion To conclude, our thesis, which is based on the decade-old halving cycle, suggests minimal headwind between now and April 2025. Then, we expect downward pressure will start mounting gradually through October 2025. Hence, we expect this period to be the golden opportunity to be positioned for heavy bullish bias. This can come in the form of call options on Bitcoin or even call options on Bitcoin mining companies. Unfortunately, our risk profile only allowed us to stay in the spot market, with some exposure to short puts. Hence, we've singled out CLSK and MARA as our pick to tilt our Bitcoin portfolio into. In light of our new Bitcoin price target, we look to replicate our past BITF play by shorting put options as a way to take profits while having exposure to more Bitcoin upside. Unlike the past cycle, there is added complexity to the current bull run. There is a wide range of price targets depending on the assumed base price, and every price target resulted in breaking the decade-old resistance. Therefore, we have to revisit our thesis more frequently based on new developments in Bitcoin's, especially if it breaks the decade old resistance level. Till then, invest safe.
