Bitcoin: The Final Rally Before The Crash (Rating Downgrade)

Summary Bitcoin is approaching key resistance near $120,000, with October historically being its most bullish month. BTC's 4-year cycle and technical indicators suggest a potential market top within the next 6-12 months, possibly peaking near $150,000. Global liquidity trends and central bank actions will be crucial, with risks from inflation or an AI-driven recession threatening the rally. Given mounting risks and overextended technicals, now is a prudent time to de-risk and reduce Bitcoin exposure. Thesis Summary Bitcoin ( BTC-USD ) has once again reclaimed the $120,000 area as we enter what could be the most bullish month of the year. However, the Bitcoin 4-year cycle is nearing its end, suggesting Bitcoin could be topping in the next run-up. Ultimately, though, I believe global liquidity will determine if we can head even higher for longer. Nonetheless, as we reach my long-term Bitcoin target, I do think this could be a good time to de-risk from Bitcoin. While I remain bullish long-term, I am downgrading Bitcoin to a Hold due to these reasons. Uptober And The 4-Year Cycle Historically speaking, October has been the best month for Bitcoin in terms of price appreciation, hence the coining of the term Uptober. BTC Seasonality (TrendSpider) With not that much to go on in terms of traditional fundamentals, crypto investors often look at things like seasonality. This brings me to my next point, which is the fact that we are approaching the end of the Bitcoin 4-year cycle. BTC 4-year Cycle (Crypto Rover) This 4-year cycle also coincides with the dates of the Bitcoin halving, which usually precedes a big price rally, followed by a top, bear market, consolidation, and then the next halving, which restarts the cycle. Bitcoin’s last halving was on April 19th, 2024. If history is about to repeat itself, then we should see Bitcoin top anywhere from 12-18 months following this halving. Ultimately, this means Bitcoin’s four-year cycle could complete in Q4 of 2025. But although the halving cycle has served us well in the past, I think the real mover of Bitcoin is the liquidity cycle, which has just happened to coincide with the 4-year halving cycle. What’s Next For Liquidity? Bitcoin vs. M2 (Bitcoin Magazine) As we can see, Bitcoin has moved in line with Global M2 for the last decade. The tops in 2018 and 2022 also coincided with liquidity and market tops. So the real question here is: what’s next for liquidity? Over the past few months, we have benefited from some favourable liquidity dynamics. PBoC liquidity injections Weaker USD Lower bond volatility Fiscal stimulus As we approach 2026, this is something that could change. Japan and the US continue to taper, though the Fed has now begun cutting rates. China’s PBoC should continue to support markets as it expands liquidity. And the dollar looks set to keep sliding. Overall, it looks like countries around the world are intent on keeping stimulus in line with the dynamics I’ve mentioned before of monetary debasement necessary to deliver global debt. The Two Big Risk Factors As we approach 2026, though, there are two big risk factors that could derail markets. AI Recession Inflation The outlook for liquidity depends on what Central Banks and markets do. My biggest worry, right now, is that as Central Banks like the Fed cut into an already hot economy, inflation could spark another 2022-style selloff in equities and crypto. On the other hand, an AI recession could take the market down in the other direction, through deflation. Expectations are sky high right now, perhaps with good reason, but this could begin to unwind in the other direction as growth and valuations peak. In my opinion, the biggest bottleneck right now is power, with today’s power grids potentially not being ready to accommodate the sudden increase in AI demand. Data Center Energy Demand (SemiAnalysis) This means even if AI efficiencies are real, it’s possible that data centers are going to be overbuilt, to the extent that not all of them might be able to operate given energy limitations. Bitcoin Technical Analysis All in all, there are various risk factors lining up, which, paired with the dynamics of the 4-year cycle and the fact that we are reaching important technical levels, make me wary about Bitcoin over the next six months. BTC TA (Author's Work) This Bitcoin rally is running on fumes. Note that we are having trouble breaking through the resistance from the green trendline drawn from the 2021 top, which also lines up quite well with the 2 ext of the bear market. On the other hand, we are forming a huge RSI divergence on the weekly chart. In my view, if we managed to reach the 2.618 ext at $150,000, paired with the RSI entering overbought and touching that trendline we have drawn on the indicator, this would be enough for me to reduce exposure significantly to Bitcoin. On the other hand, a break below the 50-week EMA now, which sits at $100,000, would be an initial indication that momentum has turned decidedly bearish Final Thoughts Bitcoin has increased more than 8x since its bear market lows, and it could 10x if we reach the $150,000 level outlined above. With mounting risks in terms of liquidity, AI hype reaching a fever pitch, and technicals looking shaky, I think we could be near the end of this Bitcoin bull run. What happens next will depend on the actions of Central banks, but either way, I think it’s time to take some chips off the table.