4 December 2024
In the latest episode of The Milk Road Show, Charles Edwards, founder of crypto hedge fund Capriole Investments, provided an in-depth analysis of Bitcoin’s current state, its future trajectory, and the potential conclusion of the traditional 4-year Bitcoin cycle.
Edwards posits that Bitcoin’s journey to $100,000 could be the catalyst for an unprecedented price acceleration. He suggests that once this psychological and technical barrier is breached, Bitcoin could potentially double in value within weeks. Drawing parallels with gold’s recent performance, Edwards stated, “If you look at gold this year, it went up 33% in 16 weeks—that’s a $3.8 trillion move in a really old asset. For Bitcoin to go from $100K to $200K, that’s just $2 trillion on an asset that trades 24/7 and is more accessible globally.”
He emphasizes that Bitcoin’s relatively smaller market capitalization compared to gold allows for more rapid price movements. Historically, after surpassing previous all-time highs, Bitcoin has experienced significant and swift appreciations, entering periods of price discovery where supply constraints can lead to vertical price increases.
When Will Bitcoin Price Double?
The $100,000 mark is not just a round number; it represents a significant resistance level due to several factors. Edwards highlighted the presence of a substantial sell wall at this price point, noting, “We have the biggest sell wall we’ve ever seen in the order books for Bitcoin at $100,00. I think just yeah once that’s cleared out, that’s when you know everyone who wanted to sell has sold and you have these really sharp rapid vertical price appreciation moves because there’s just no more supply left.”
Additionally, many investors who entered the market at lower prices may view $100,000 as an optimal point to realize profits, potentially creating selling pressure. However, Edwards remains optimistic that this barrier will be surpassed, especially within the next few months, given the seasonal strength observed in Bitcoin’s price movements during Q4 and Q1.
“We are [at a point] in the cycle where we are seasonal and this is kind of like the optimal two to four month period, […] maybe a five to six month period every four years. After each Halving every four years, you have about 12 to 18 months where you get 90% to 95% of all the cycles returns out of every four years. So most of it happens in that one year alone. If you look at Q4 and Q1 that again is the majority of the returns […] once you have a strong monthly breakout above all time,” the hedge fund CEO stated.
While Edwards is bullish on Bitcoin’s prospects, he cautions investors about the inherent volatility of the market. He pointed out that corrections of 20% to 30% are normal during bull markets and that investors should be prepared for such fluctuations. “It’s normal to have 30% drawdowns every few months in a Bitcoin bull market,” he noted.
Factors such as increasing leverage in the market could exacerbate price swings. Edwards mentioned that if leverage and funding rates continue to rise without chipping away at the existing sell wall, Bitcoin could revisit lower support levels, potentially around $80,000. However, he emphasizes that such volatility is a natural part of Bitcoin’s growth cycle and not necessarily indicative of a long-term downturn.
The End Of The Traditional 4-Year Cycle?
A significant point of discussion was whether the traditional 4-year cycle, largely driven by the halving events, is reaching its conclusion. Edwards believes that as Bitcoin matures and integrates more deeply with traditional financial systems, the impact of the halving on market cycles will diminish.
“As Bitcoin’s inflation rate decreases and it becomes more integrated with traditional finance, the four-year halving cycles may become less impactful. The large 80% drawdowns we’ve seen in the past might not happen in future cycles,” he stated.
This maturation process could lead to more stable growth patterns and reduced volatility. Edwards suggests that future cycles may see shallower corrections, possibly around 60% rather than the dramatic declines of previous years.
Notably, several potential catalysts could propel Bitcoin’s price to unprecedented levels. Edwards mentioned the possibility of the US government establishing a Strategic Bitcoin Reserve under President-elect Donald Trump.
While he estimates the probability of this occurring in 2025 to be around 30%, he acknowledges that such an event would be a game-changer. “Assuming [the U.S. government] doesn’t sell their existing holdings is great, but it’s probably not going to help the cycle a lot. Actively buying Bitcoin could be a game-changer,” he remarked.
Corporate adoption is another significant factor. The potential for major corporations to add Bitcoin to their balance sheets could drive substantial demand. Edwards highlighted the upcoming vote by Microsoft on this matter, saying, “Let’s hope it’s Microsoft [on December 10].”
Furthermore, the success of spot Exchange-Traded Funds (ETFs) has opened the doors for institutional investors. The sustained demand from ETFs has been absorbing Bitcoin supply steadily. Edwards observed, “The ETFs have just been sucking Bitcoin out of the system ferociously.”
Bitcoin Price Predictions
Edwards provided a base and an optimistic scenario for the Bitcoin price in this cycle. He stated, “I’d be surprised if we don’t get to $140,000.” This base case assumes steady market conditions without any extraordinary positive events.
In a more optimistic scenario, he believes Bitcoin could reach $200,000, especially if significant catalysts, such as government or corporate adoption, materialize. “We could easily get to $200,000. Once we clear those all-time highs, Bitcoin does multiples very quickly,” he explained.
He concluded: “”Once we’re above $100,000, people who aren’t in Bitcoin just cannot comprehend Bitcoin above $100,000 […] That’s when you see the real switch flick and the flows happen.”
At press time, BTC traded at $94,814.
