Year to date, Bitcoin (BTC 0.24%) is up 30%, capped off by a sizzling early October rally that has already seen its price hit $120,000. That's just a stone's throw away from an all-time high of $124,457, which it hit during the summer.
So is Bitcoin a buy now? Or are there better buys out there right now in the crypto market? Let's take a closer look.
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The Bitcoin seasonality effect
If history is any guide, Bitcoin performs best in the final quarter of the year. Typically, Bitcoin shakes off a summer malaise sometime in September, and then goes on an epic rally in the months of October and November.
This is just not an anecdotal observation. It's backed up by more than 10 years of data. Since 2013, Bitcoin has increased in value by 20% in October, 46% in November, and another 5% in December.
Overall, Bitcoin has increased in value by an average of 80% in Q4. Two of the best fourth quarters ever were in 2017 and 2020, when Bitcoin went absolutely ballistic.
Thus, Bitcoin's early October rally has crypto market participants already talking up the potential of yet another "Uptober." The problem, of course, is that past performance is no guarantee of future performance. There's no rational reason to explain why Bitcoin does so well in the final quarter of the year, and that's what makes me nervous.
Bitcoin to $180,000?
That being said, a growing number of analysts and investors are convinced that Bitcoin is about to rally hard. Citigroup (C 0.39%), for example, recently put out a research note to its clients, suggesting that Bitcoin could hit $132,000 by the end of this year, and then $181,000 next year.
That's on the conservative side. In September, Tom Lee of Fundstrat suggested that Bitcoin could nearly double in value to hit a price of $200,000 this year. According to Lee, a series of aggressive Fed rate cuts could incentivize investors to move their money into riskier, more speculative assets such as Bitcoin.
CRYPTO: BTC
Key Data Points
And there are countless catalysts that could send Bitcoin to $180,000. Citigroup primarily focuses on strong demand from institutional investors, who are using the spot Bitcoin ETFs as an easy, convenient way to get their exposure to Bitcoin. As long as flows into these spot Bitcoin ETFs remain positive, they should help to push the price of Bitcoin higher.
Moreover, the ranks of Bitcoin treasury companies continue to grow. This is another important source of demand. These Bitcoin treasury companies are accumulating Bitcoin at an unprecedented pace. According to data from BitcoinTreasuries.net, the top 100 Bitcoin treasury companies hold over 1 million BTC, or approximately 5% of all Bitcoin in circulation. That, too, helps to give Bitcoin a very nice floor going forward.
The contrarian view on Bitcoin
If you zoom out and take a big picture view, though, there are a lot of reasons to be concerned about Bitcoin. For example, Bitcoin is hardly the top-performing major cryptocurrency. Yes, Bitcoin is up 30% for the year, but Ethereum (ETH 1.29%) is up 35% and XRP (XRP +0.56%) is up 45%. Right now, crypto investors appear to be displaying a clear preference for riskier altcoins.
Moreover, Bitcoin is not even outperforming gold right now. Over the past year, gold is up 45%. So why would you settle for 30% gains with Bitcoin right now? On a risk-adjusted basis, gold would appear to be the better buy.
Moreover, if you want to embrace the "Bitcoin seasonality effect" as an important catalyst for future price appreciation, then you probably also need to accept the historical data surrounding the Bitcoin halving. After each halving event, Bitcoin typically goes on an epic rally for a period of 12 to 18 months, before ultimately crashing in value.
Well, the last halving took place in April 2024, so it's soon going to be 18 months. As a result, red danger signals should be flashing right now, alerting investors that the Bitcoin rally of the past 18 months could be coming to an end soon. Just look back to November 2021, when Bitcoin suddenly nosedived in value after hitting a (then) all-time high of $69,000.
Yes, Bitcoin is a phenomenal asset to hold over the long term, but it's prone to periods of extreme boom and bust. So if you decide to load up on Bitcoin now, be prepared to hold through what could be very intense turbulence ahead.
