Key Takeaways

This report provides a detailed analysis of Bitcoin’s price movements, combining technical analysis, macroeconomic factors, and fundamental insights.

In technical analysis, different indicators provide unique perspectives. For instance, the S2F Model offers a long-term framework by simulating Bitcoin’s market cycles, while AHR999 helps identify cyclical low points and optimal entry opportunities at the start of a bull market.

On the fundamentals side, the analysis highlights the impact of macroeconomic factors, such as inflation and unemployment, which heavily influence the Federal Reserve’s interest rate decisions. Additionally, it examines the effects of BTC ETF net inflows on Bitcoin’s price, along with the policy outlook following the election year and Trump’s presidency.

From the analysis, Bitcoin is estimated to be in the mid-to-late stages of a major bull market cycle. It is projected to reach its cycle peak around March or April 2025, with a potential price target of approximately $120,000.

Once the bull cycle ends—likely in the first half of 2025—the market is expected to enter a consolidation phase, Bitcoin’s price may fluctuate within $90,000 and $100,000 during the consolidation period.

Strategically, it is crucial at this stage to avoid excessive leverage and instead focus on indicators that can signal market peaks, such as when the AHR999 value approaches 2.

Primer

In recent years, Bitcoin has emerged as one of the world’s best-performing assets. The table below illustrates the performance and correlation of major asset class buckets, as reported by Jurrien Timmer, the Director of Global Macro at Fidelity Investments, highlights the annualized returns, volatility, and Sharpe ratios of various assets over the past five years.

As evident, Bitcoin is in a league of its own, with the chart below showing a cumulative Sharpe Ratio of 1.1—the highest globally. Bitcoin once again stole the spotlight in 2024 and shows strong potential to maintain its momentum in 2025.

In the following sections, we will conduct a comprehensive analysis of Bitcoin’s price movements, delving into technical analysis, the economic landscape, and fundamental aspects. We will also derive key insights and conclude with forecasts for the upcoming year.

Technical analysis

On-chain data offers a wealth of valuable insights. In this section, we will examine several key indicators derived from various types of on-chain data, with a focus on those most effective for evaluating cyclical trends. Each indicator has its own distinct purpose and application.

1. S2F Model

Let’s first consider the Stock-to-Flow (S2F) Model, a key framework for understanding Bitcoin’s valuation and its market cycles. Developed by the analyst PlanB, the S2F Model calculates the number of years required to produce the current total supply of Bitcoin at the current annual production rate. The formula is as follows:

SF = Total Supply/Annual Production

This model compares Bitcoin to commodities like gold, silver, and platinum, which are considered “store of value” assets due to their ability to retain value over long periods, thanks to their relative scarcity. Currently, Bitcoin’s S2F ratio stands at approximately 121.4, compared to gold’s 62. The model is widely cited because of its strong historical correlation with Bitcoin’s price, boasting a confidence interval of around 95%. Over the years, Bitcoin’s price has closely aligned with the model, reflecting clear cyclical patterns influenced by halving events.

According to the chart, Bitcoin is currently in the mid-phase of a bull market and has yet to reach its peak. While the price increases in each bull market tend to diminish with each cycle, it is still reasonable to anticipate that Bitcoin could surpass $200,000 in the following years. However, as in previous bull markets, investors should also expect periodic corrections of around 30% during the upward trajectory.

2. Stablecoin Total Market Cap

The total market cap of stablecoins serves as a key indicator of liquidity within the crypto market. A sustained increase in this metric reflects a consistent inflow of external capital, providing a critical foundation for supporting bullish market cycles.

Over the past year, the Stablecoin Total Market Cap has demonstrated robust growth, rising from $132.18 billion to $200 billion—a 51% increase in overall liquidity. This trend was particularly pronounced in Q4, where the market cap surged from $170 billion in early November to $190 billion by early December. This $20 billion influx within just one month underscores the strong alignment between rising liquidity and the ongoing bullish momentum in the crypto market.

3. AHR999

The AHR999 Indicator, developed by a Weibo user named ahr999, is a timing strategy tool designed to assist Bitcoin investors in making informed decisions. It evaluates Bitcoin’s price relative to its historical valuation, providing insights into accumulation opportunities and market conditions.

The AHR999 Indicator is calculated as the ratio of Bitcoin’s market price to its 200-day moving average (200DMA), adjusted by a logarithmic scaling factor to account for Bitcoin’s exponential growth. The formula is:

AHR999 = (Bitcoin Price /200DMA)*Logarithmic Adjustment Factor

When the AHR999 index is < 0.45 (red line), it indicates a buying opportunity at a low price. When the AHR999 index is between 0.45 and 1.2, it is suitable for regular investment.When the AHR999 index is > 1.2 (green line), it suggests that the coin price is relatively high and not suitable for trading.

The AHR999 Indicator is a powerful tool for identifying cyclical low points and optimal entry opportunities at the start of a bull market. By analyzing its thresholds, investors can use it to time their market entries and exits effectively. Historical data from the last three cycles reveals a consistent pattern: each cycle typically includes two cyclical low points (highlighted by green bars, where the AHR999 drops below 0.45). Entering the market during these periods significantly increases the likelihood of generating profits within the cycle. Conversely, red bars indicate moments when the indicator surpasses 1.2, signaling the official onset of a bull market.

For instance, on October 27, 2020, the AHR999 Indicator rose above the 1.2 threshold when Bitcoin was priced at around $13,000, marking the start of a bullish phase. This demonstrates the indicator’s reliability in providing actionable insights for long-term investment strategies.

In the latest cycle, Bitcoin’s price first broke above the AHR999 threshold of 1.2 in February 2024, reaching an ATH of $73,000 in March. After 10 months of volatility, it surged past the 1.2 level again in December, fueled by Trump’s election victory, and hit a new ATH of $104,000.

This prompts the question: is this the end of the third bullish cycle? To explore this, we analyze the cyclical peaks of the AHR999 Indicator under the assumption of a diminishing trend across cycles. Historical peaks were recorded at 67.9, 24.1, and 6.64 for the past three cycles. Using a returns-based model, the estimated peak for the current cycle is approximately 2.09.

So far, the highest recorded value for this cycle is 1.68. While this is nearing the predicted peak, it suggests that the cycle has not yet fully matured. In my view, there is still potential for further upward movement before this cycle reaches its ultimate peak.

4. STH-MVRV

The term MVRV refers to the ratio of “Market Value” to “Realized Value.” Simply put, it is calculated by dividing the market price (Price) by the realized price (Realized Price). The “Realized Price” represents the average on-chain acquisition cost of all circulating BTC.

MVRV = Market Value/ Realized Value

The MVRV ratio measures whether Bitcoin’s trading price is overvalued or undervalued relative to its “fair value.” For instance, an MVRV ratio of 3.2 indicates that the current price has provided investors with an average profit of 320%. In contrast, an MVRV ratio of 0.8 suggests that investors, on average, have incurred a 20% loss.

To enhance its accuracy, the MVRV ratio can be adjusted by excluding long-term holders (LTH), who typically maintain high profitability during bull markets. Their influence tends to skew the MVRV average upwards. By removing this group, the metric focuses exclusively on short-term holders (STH), resulting in the Short-Term Holder MVRV.

The Short-Term Holder MVRV further compares Bitcoin’s current MVRV ratio to its 155-day simple moving average (SMA). This provides insights into the profitability of short-term holders and broader market conditions:

Above 1: Indicates profitability for short-term holders.

Below 1: Suggests unrealized losses for STH.

Based on the projection of MVRV’s on-chain average turnover cost and the average cost of active investors over the past three cycles, two possible scenarios emerge for Bitcoin’s price trajectory in the coming months:

Scenario 1: Bullish Rebound in March–April

Bitcoin’s price is estimated to have a high probability of exceeding $120,000 between March and April, though it is unlikely to surpass $150,000. However, as turnover costs are subject to fluctuations, this estimate requires biweekly adjustments to remain accurate.

If this rebound materializes, it could mark the end of the current bullish trend. Beyond this point, the market’s direction will largely depend on macroeconomic policy changes, making external factors a key determinant for further price movements.

Scenario 2: Post-Peak Consolidation Phase

Following a potential peak in March–April, the market is likely to enter a 4–5 month consolidation phase. During the early stages of this phase, the turnover cost and active investor cost are expected to decline in tandem.

As consolidation progresses, these costs may begin to diverge, introducing increased uncertainty into market behavior. While the consolidation phase is expected to exhibit a broad trading range, it is unlikely that prices will surpass the peak observed during the March–April period.

5. URPD

By analyzing cross-sectional data and mapping all BTC holding prices at a specific moment, we can create a bar chart with the x-axis representing prices and the y-axis showing quantities, namely URPD (UTXO Realized Price Distribution).

This indicator reveals insights that traditional candlestick charts cannot, such as position dynamics, particularly the emergence of “high-volume bars” (notable price levels with significant activity). Gray bars indicate the price at the given time. Historical URPD trends suggest that high-volume bars are typically driven by strong conviction among BTC holders. When these bars appear near current price levels, they often serve as solid support, fueling upward price momentum.

Currently, on-chain data indicates the formation of an accumulation zone between $92,000 and $100,000. Within this range, a substantial high-volume bar of over 600,000 BTC has emerged at the $97,000 level, tapering symmetrically on both sides from this peak.

The emergence of high-volume bars highlights two key insights:

1. This price level is unlikely to represent the absolute peak of the current bull market cycle. 2. Intense buying and selling activity within this range has resulted in significant turnover, leading to the formation of a strong accumulation zone.

Such accumulation zones create a “damping effect” on price movements. When the price approaches these zones, they act as resistance, making it difficult to break through. Conversely, when the price moves away, the zone exerts a gravitational pull, drawing the price back toward it.

In summary, the current position structure remains “healthy,” with the $92,000–$100,000 range providing solid support. Over time, as turnover within this range increases, the support becomes even stronger, effectively setting a lower boundary. Whether the price can reach new highs or reverse a weakening trend will depend heavily on the impact of macro environment and policies on market expectations as we move into 2025.

Foundamental analysis

1. Macro

As more large institutions invest in Bitcoin, its price has become increasingly correlated with the U.S. market, currently at 69%. This highlights the growing importance of the broader economic environment. With that in mind, we’ll analyze some of the key factors driving macroeconomic shifts.

1.1 Interest Rate

Interest rates are a key driver of overall economic performance. When rates rise, investors tend to hold onto cash, reducing liquidity and pushing the market into a bearish phase. On the other hand, lower rates encourage investment, fueling economic growth and leading to a bullish market.

The most closely watched rate is the Federal Funds Rate, which the Federal Reserve uses to provide forward guidance on future rate expectations based on market conditions. This helps investors align with a shared outlook and reduces market volatility.

As a result, many institutions pay close attention to the FOMC (Federal Open Market Committee) meetings to gauge the Fed’s economic outlook. They also rely on the Fed’s dot plot, which offers probabilities into future rate projections, making it a key resource for shaping investment strategies.

Given the importance of interest rates, what factors influence how central banks determine their levels? Here are the two key drivers: Inflation and Unemployment Rate.

1.2 Inflation

Inflation serves as a key measure of market activity, with the Federal Reserve targeting a stable 2% rate. The Consumer Price Index (CPI) is the primary indicator used to track inflation. To prevent excessive inflation, the Fed often raises interest rates when the CPI rises too high, as demonstrated by the aggressive rate hikes following the post-pandemic inflation surge.

Over the past year, the CPI showed signs of easing compared to its April peak. However, as rate cuts improved market conditions, inflation began to climb again, rising from 2.4% in October to 2.7%. This upward trend has influenced the Fed’s policy approach, leading to a slower pace of rate cuts or even a potential pause.

As for future inflation trends, Jurrien Timmer’s insights provide valuable perspective. He notes that while a repeat of the 1970s Great Inflation is unlikely, historical patterns raise concerns. In the late 1960s, inflation waves created progressively higher highs and lows, paving the way for persistent inflation. Similarly, after the COVID-driven inflation surge of 2022, the inflation rate has stabilized at a higher low of 2.8% (compared to 0.9%) and continues to show volatility.

What if the economy accelerates in 2025 and inflation rises again? This would likely prompt a more restrictive Fed and a higher term premium. However, based on the TIPS curve, the market isn’t pricing this scenario in at all.

1.3 Unemployment Rate

When unemployment rises, markets often anticipate an economic downturn. To address this, the Federal Reserve works to balance the risks of recession against inflation. Simply put, if unemployment goes up, the Fed is more likely to consider further interest rate cuts.

The table below highlights unemployment trends over the past year. During the first half, the rate climbed steadily from 3.7% at the start of the year to 4.3% by August. In the second half, it leveled off, stabilizing around 4.2%.

1.4 US Dollar (DXY)

The U.S. dollar (USD) is the world’s primary reserve currency, influencing global trade, investment, and financial stability. A strong USD makes U.S. exports less competitive but lowers import costs, while a weak USD boosts exports but raises inflation risks. It also attracts foreign investments to U.S. markets and impacts global commodity prices, such as oil, which are priced in USD. In emerging markets, USD fluctuations can significantly affect debt repayment and economic stability.

The USD Index (DXY) measures the dollar’s strength against a basket of six major currencies, with the Euro being the largest component. A rising DXY signals a stronger dollar, making U.S. exports pricier but helping control inflation through cheaper imports. A falling DXY does the opposite, boosting exports but raising inflation risks.

The recent steady rise in DXY highlights a strengthening U.S. dollar against other major currencies, climbing from 100 in October to 108.89, its highest level in two years.

Over the next year, the DXY is likely to remain elevated and volatile, as there is little economic basis for a significant decline. Since the Euro and Yen make up about 70% of the index, Europe’s aggressive rate cuts have set the stage for a strong dollar, while the pace of Yen rate hikes will depend on the Federal Reserve’s timing for rate cuts. Ultimately, the outlook will also be shaped by policies from Trump and the new Treasury Secretary.

2. BTC ETF

The introduction of a BTC ETF early last year provided traditional financial institutions with a pathway to invest in Bitcoin. In just two months, it generated a total trading volume of $60 billion, becoming one of the strongest catalysts for the current cycle’s price rally.

By January 8, 2025, BTC ETFs had accumulated $106.82 billion in net assets, representing 5.74% of Bitcoin’s total market capitalization. Notably, the leading BTC ETF, IBIT, recorded the third-highest inflows among all ETFs in 2024, outperforming globally recognized funds like QQQ and SPY.

Regulatory changes by the U.S. SEC are expected to drive broader adoption of Bitcoin. Traditionally, institutional investors faced barriers such as regulatory and funding constraints, making it difficult to hold Bitcoin positions. However, the successful launch of BTC ETFs has opened the door for more institutions to enter the market, providing stronger support for Bitcoin’s underlying fundamentals.

3. Presidential Cycle and Trump's Policy

In addition to the launch of BTC ETFs, 2024 was also a significant year as it marked the U.S. presidential election. Jurrien Timmer highlights that presidential election cycles have historically influenced market performance. Based on past data, 2024 closely aligned with the “down mid-term” year pattern seen in previous cycles, such as 2022.

As we enter the first year of the new presidential cycle in 2025, Timmer notes it is typically the second weakest year in the four-year cycle, with years three and four being the strongest. However, “weak” often means below average, not necessarily negative. He also suggests 2025 could differ due to a potential second-term sweep, though historical patterns should be viewed cautiously given their limited predictive reliability.

President Trump’s election victory, which sent Bitcoin soaring to ATH, was met with strong anticipation from the crypto industry. While the first eight months of 2024 saw the sector thrive due to the launch of spot ETFs, the last four months were largely driven by Trump’s influence.

At the 'Bitcoin 2024' Conference, Trump outlined several major initiatives for crypto, with the ultimate goal of positioning the United States as a Bitcoin superpower. Here’s a brief breakdown of his potential crypto policies:

Establishing a Strategic Bitcoin Reserve: In July 2024, Wyoming Senator Cynthia Lummis introduced the Bitcoin Strategic Reserve Act (BITCOIN Act of 2024), proposing the purchase of up to 200,000 BTC annually for five years, totaling 1 million BTC. The reserve would be managed by the U.S. Treasury uses a secure, decentralized storage network to ensure resilience and safety.

Creating a Bitcoin and Cryptocurrency Advisory Council: To promote crypto-friendly policies, Trump plans to form an advisory council to guide regulatory development. Additionally, he announced the creation of the Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, to reduce government bureaucracy and waste.

Lowering Electricity Costs to Boost Bitcoin Mining: Trump aims to make U.S. electricity prices the lowest globally to support Bitcoin mining. However, this faces challenges due to the market-driven nature of the U.S. energy prices and the environmental concerns associated with mining’s high energy consumption.

Advancing CBDCs and Stablecoins: While stablecoin legislation began under Republicans in 2023, the U.S. lags behind other countries in CBDC development. Under the new administration, there is potential to advance these efforts, as stablecoins are seen as an extension of U.S. dollar dominance. Whether the new government prioritizes CBDC and stablecoin growth remains to be seen.

Outlook for 2025

In summary, Bitcoin is currently in the mid-to-late stages of a major bull market cycle, according to the S2F Model. Metrics such as AHT999 and URPD suggest the current price has yet to reach its peak. Historical on-chain data (including S2F and STH-MVRV) indicates that Bitcoin could hit its cycle high around March or April 2025, potentially reaching approximately $120,000.

This projection, however, hinges on strong fundamentals. The macroeconomic environment is key, requiring a successful soft landing with inflation stabilizing around 2%, unemployment rates remaining steady, and the Federal Reserve delivering anticipated rate cuts to improve market liquidity. Additionally, the Trump administration’s execution of Bitcoin-related policies will be pivotal. If Bitcoin gains U.S. government backing and regulatory pressures ease, market acceptance could grow significantly. This would likely encourage more institutions, akin to MicroStrategy, to adopt Bitcoin as a capital reserve and drive additional investments through ETFs, further boosting prices. Under such conditions, surpassing $120,000 would be entirely feasible.

After the bull cycle ends—likely in the first half of 2025—the market is expected to enter a consolidation phase. URPD data suggests strong support between $90,000 - $100,000, meaning Bitcoin could see price fluctuations within this range. During this period, market dynamics will depend heavily on macroeconomic conditions and news developments.

It’s also important to consider short-term volatility. As Bitcoin approaches its relative peak, liquidation volumes in December 2024 have surged significantly compared to the past six months, highlighting increased turbulence as the market climbs toward new highs.

When it comes to strategy, at the current stage, it is advisable to avoid excessive leverage and focus on indicators that can help identify market peaks, such as when the AHR999 value approaches 2. Exit points should be determined based on individual risk tolerance. After the bull market ends, investors should stay alert to downside risks and closely monitor macroeconomic changes and market developments.

The SoSoValue platform is an incredibly useful tool for providing a comprehensive analysis of Bitcoin’s price performance. It enables users to access and evaluate on-chain data, including funding rates, miner revenue, hashrates, and other key indicators. Furthermore, it consolidates critical macroeconomic information, such as schedules for upcoming economic data releases, the FedWatch Tool, and DXY trends.

The platform also offers detailed insights into BTC ETF historical data, making it an invaluable resource for investors seeking to conduct in-depth research on Bitcoin’s performance.

All in all, while the information provided above offers guidance on Bitcoin’s long-term trends, the future remains difficult to predict. Ultimately, profiting from this bull market requires crafting a well-thought-out strategy, executing it effectively, and focusing on the most influential factors. Choosing the right platform, such as SoSoValue, allows investors to efficiently access real-time data, take timely actions, and maximize returns.