Bitcoin hit a multi-month high this week thanks in part to investors fleeing volatility and treating the largest cryptocurrency like a safe haven again.
From early June, the price had been stuck in a range between $60,000 and $70,000, disappointing investors still hopeful Bitcoin could return to the boom times of October when it skyrocketed above $126,000.
Late last month, it finally broke out of that range, and on Thursday, it reached a four-month high of $82,262, before paring back gains. Bitcoin was down 2% at about $79,800 on Friday afternoon, still near the highest level it had reached since May.
In a recent note to clients, Bitwise’s director of research for Europe, André Dragosch, said the cryptocurrency’s recent upswing comes as investors have treated it more as a store of value than a risky tech stock.
That’s after Treasury Secretary Scott Bessent recently revealed a plan to increase the Treasury’s buybacks of long-dated bonds as yields surged. The move raised fears of “financial repression” and came as the 30-year yield hit its highest level in nearly two decades late last month, with the Iran war keeping inflation forecasts elevated.
Amid Bessent’s proposed measure, which hasn’t been rolled out yet, Bitcoin’s 90-day correlation with gold has neared a six-year high, Dragosch wrote in the note.
That marks a change from earlier this year, when Bitcoin traded more like a risk-on asset that was more correlated with tech stocks.
“When things get serious and macro forces are strong, investors are discriminating less and less between bitcoin and gold as they navigate rising currency debasement risks,” Dragosch wrote in the note. “In those scenarios, bitcoin has recently started to look like an amplified version of gold.”
Still, this may not be as good a sign for the overall market. The last time Bitcoin and the dollar were this closely correlated was in 2020, as central banks worldwide responded to the COVID-19 pandemic with stimulus and quantitative easing, Dragosch warned.
Some traders also claim Bitcoin’s recent good news could be short-lived, given the four-year cycle theory, which holds that Bitcoin’s bear market lows and bull market tops tend to occur in four year increments. This means Bitcoin’s next bear market bottom could be some time in November, four years after the last bear market bottom in November 2022, if the theory holds true, according to Fidelity’s fourth quarter crypto market outlook.
The four-year cycle theory is partly tied to the process of Bitcoin’s halving, which cuts rewards to miners that keep the blockchain that backs up Bitcoin running.
One of the louder voices touting the four-year cycle theory is Alex Thorn, Galaxy’s head of firmwide research. In a June report, Thorn wrote “the historical analogies suggest a base case bottom for the current drawdown between $40k-46k occurring sometime between now and Q4 2026,” although he noted this was not a price prediction.
Still, Chris Kuiper, vice president of research at Fidelity Digital Assets, said in the fourth quarter market outlook that this theory doesn’t necessarily mean there will be a downslide later this year, as the timing of the four-year cycle theory isn’t exact.
“In light of this, having a long-term perspective and holding period is what has historically been the most beneficial for investors,” Kuiper wrote in the report this week.
