When Majors Breakout and the Election Year

Gm my dear readers, it has been quite some time since we’ve last crossed paths. With the election cycle imminent and BTC finally looking like it is structurally breaking out of 7 months of chop, we commence the next phase of this cycle. (Subscribe to my substack here for an annotated version)

The market has been turbulent, to say the least, but let’s start by framing this within the context of 2024's election year. The upcoming U.S. presidency is a massive catalyst, and no one can deny the close relationship between political leadership and the crypto markets. While both nominees Kamala and Trump are sure to hand out welfare checks to its constituents. Donald Trump, who’s already made significant strides in prediction markets, is shaping up to be a huge favorite for this next term. His approach to the crypto industry is what participants think it takes for BTC and the broader market to new highs. Whether this is true or not from a policy perspective is irrelevant. It is only relevant that this is what participants think by and large, and when enough of us believe that something is that market consensus it becomes consensus. Crypto is indeed no stranger to the Keynesian beauty contest.

But let’s dive deeper into why BTC’s breakout from this massive range could be the precursor to even more significant events. Bitcoin's 4-year cycle, shaped by its halving, has typically resulted in exponential price movements post-halving. We’re coming off another one in early 2024, and, like clockwork, the stage is set for BTC to break out.

Election-Year Dynamics and the Halving: A Symbiotic Relationship

Election years have always brought fireworks to financial markets, and 2024 is shaping up to be no different. While Bitcoin gears up for its post-halving rally, the U.S. government is gearing up for another round of "handing out candy to the kids"—stimulus, rate cuts, and anything else to make sure the current incumbents look as favorable as possible to their constituents.

One key lever the Federal Reserve is pulling right before the election is the long awaited interest rate cuts. With inflation concerns still in the rearview mirror, the Fed cut by 50 basis points in an attempt to spur economic growth and maintain a positive outlook for the current administration. When most market participants were expected a normalization cut of 25bps, a 50bps cut is a stimulus bazooka. With forward guidance suggesting a cut at most if not every meeting throughout 2025.

You might have noticed that despite global turmoil, especially in the Middle East, gas prices at the pump have mysteriously started to fall. Just take a look outside. It’s not by accident. The government knows that cheaper gas prices will make voters feel a little better about their day-to-day expenses. This isn’t a new play—election cycles often come with these strategic price dips, and this year’s no different. On top of that, the jobs report is looking healthier than ever, but not because of organic economic growth. The massive boost in job numbers has been driven by federal job growth, another strategy to make the current administration seem like it's working hard for the people. It’s a temporary solution to a long-term problem, but for now, the narrative works.

All of this candy being handed out ahead of the election has broader implications for Bitcoin and the crypto markets. Cheap gas, booming job numbers, and easier access to liquidity will trickle down to the markets, boosting economic activity and bringing a flood of capital into risk-on assets like BTC and tech stocks.

In short, we’re entering a phase where fiscal policy, election-year incentives, and Bitcoin’s market cycles are all converging at once. The incumbents are doing everything in their power to keep voters happy, and that means we’ll likely see a favorable environment for risk assets, including BTC, in the run-up to the election.

Bitcoin’s Range Breakout and the Impending Halving

Bitcoin has been trapped in a sideways range for seven months, frustrating both bulls and bears alike. But here's the thing: the longer the consolidation, the larger the eventual move. We are now nearing the point of a major breakout. And just like the 2020 pre-halving rally, we are at the precipice of another multi-year bull run.

If you analyze the on-chain metrics (see below), you’ll notice increasing demand for alt coins across with significant and staggering increases in DAU (daily active users). Which is traditionally used as a metric to evaluate high growth start ups. Crypto is moving much more in lockstep with tech, which if you haven’t been paying attention has been the greatest performer of the past 20 years and where all of the American innovation has been coming from just take a look at the Qs vs all other ETFs and performant hedge funds. And then you have advocates from the largest asset manager in the world telling you that crypto adoption is moving quicker than the adoption of internet and mobile phones.

Trump has not only expressed his crypto-friendly stance, but he’s launched his own token, World Liberty Financial (WLFI). Though the tokenomics of WLFI are questionable, its existence underlines a broader shift: crypto is becoming a major talking point in this election. Trump’s reassurance that he’ll support prosperous regulation for the crypto industry is a significant win in our battle. As you know, dear readers, regulation has long been the barrier to entry for institutional players who have yet to make the plunge into the deeper ends of the crypto bell curve. This era is going to look very different. And when your Grandfather hears that Trump says crypto can help pay of the ballooning 35 trillion dollars in federal debt, you can bet he’ll be calling up his Charles Schwab advisor, ready to allocate a portion of his portfolio to IBIT.

Look at Solana’s price action in recent months—after stagnating for months, the token has surged with a 276% increase in daily active users (see chart below). A Trump-led regulatory environment would bring capital and liquidity back into the market. Just as we've seen with Ethereum's recent surge in fees and activity off of the bottoms, a positive regulatory stance could ignite institutional demand. Solana in my humble opinion may be the biggest benefactor from the Trump trade, as soon as regulator are given the green flag the funds start piling in.

The correlation between global macro shifts and Bitcoin’s price action is undeniable. Take a look at the Bloomberg M2 Money Supply chart paired with Bitcoin’s trajectory. Historically, Bitcoin's price has surged whenever global liquidity has increased—and, right now, we are at the start of such a cycle.

Since you’ve made it this far my dear reader, I will share with you a little nugget (no pun intended ha!). Even more interesting is the fractal pattern Bitcoin seems to be mimicking with gold in its earlier price discovery era post GLD. I’ve analyzed 100s of fractals, and none seem to come closer to me so far. See the chart I’ve shared below that compares BTC’s current price action to gold’s historical moves around previous U.S. elections. I worked with @nestayxbt on my findings and he agrees, and has helped to paint this beautiful chart below (give him a follow if you haven’t already). These analogies reinforce the belief that we’re at the start of something huge.

Post-Halving Dynamics and Its Effect on BTC Price

Historically, the halving event has marked the beginning of Bitcoin's most parabolic price movements. This is because the halving reduces Bitcoin’s supply issuance by 50%, which causes a supply shock if demand remains constant or increases. When combined with macroeconomic catalysts, such as Trump's re-election and favorable crypto policies, the current post-halving dynamics are shaping up to push BTC beyond the $100,000 mark.

Bitcoin is positioned to become a store of value akin to the housing market— and you have Larry Fink, BlackRock’s CEO, going on record saying Bitcoin could become as significant as the U.S. housing market. With the halving in play and the most powerful men in the room being your biggest advocates, Bitcoin is undergoing a supply squeeze that, combined with macroeconomic conditions, points to an inevitable surge.

Trump's affinity for crypto, alongside the cyclical nature of Bitcoin, provides the perfect setup of what could be the an explosive period for Bitcoin and crypto at large. Institutional players, regulatory clarity, and the post-halving supply dynamics all point to a market that’s primed to break out of this seven-month range. Stay nimble, stay alert, and enjoy the ride.

Bitcoin is breaking out. Buckle up.