The cryptocurrency winter season is approaching

Bitcoin is surpassing one maximum after another, and nervousness in the market is growing. The bear market is approaching, but some say that the traditional cycle is being broken. And, as always, Donald Trump is getting involved.

Illustration photo. Photo: Chris McGrath/Getty Images

Illustration photo. Photo: Chris McGrath/Getty Images

The best-known cryptocurrency is subject to clear rules. There are 21 million bitcoins, and there will never be more. The vast majority of these are already in circulation. Some are (apparently) lost forever. However, a small portion has not yet been mined.

Those who solve complex mathematical operations on computers and receive bitcoins in return, however, receive a smaller reward every four years. This phenomenon, known as halving, means that fewer and fewer new coins are coming onto the market, leading to an increase in their price.

At the same time, a kind of four-year cycle has formed around this milestone, in which the price reaches its maximum about a year and a half after halving, followed by a longer period of decline, which is usually quite steep.

After the halving in 2012, there was a historic high and a subsequent slump after about a year. After the next halving, it took about 17 months. And it took a little longer for the price to peak and then fall after the halving in 2020.

Last year saw the last halving of the reward for miners. If the precedent of the last two years repeats itself, Bitcoin would now reach its peak.

Exciting “Uptober”

In the communities of crypto enthusiasts and analysts who closely monitor the cryptocurrency market, specific dates are also mentioned on which the aforementioned peak could be reached.

“If our current cycle repeats itself in the same length as the previous one, the peak could be reached on Friday, October 17, or Saturday, October 18,” calculates Vincent Ganne of the Swissquote banking group, for example.

The tenth month of the year is traditionally strong for cryptocurrencies. This is also true this time around. The most recent historical high was reached on Monday, October 6, when the price reached almost $126,200. Since then, it has fallen by a few percent, but so far it does not appear to be the major turning point mentioned above. The decline has stabilized at around $122,000, and by the middle of the week, the price had even risen to $124,000.

However, predicting the future based on the past is usually a tricky business when it comes to investing. The halving cycle is not the only factor influencing market developments.

Analysts note that most analyses of the Bitcoin market are currently inaccurate. Emotions prevail among investors, mostly due to global events.

“All the signals I've been watching for a long time have suddenly stopped working, important resistance levels have fallen without the slightest resistance, and the emotions (in the market) don't make sense to me,” writes renowned Czech crypto analyst Kamil Pošvic.

The future is uncertain, Bitcoin has never been so high

The million-dollar question is whether Bitcoin and other altcoins are still heading for their peak, which will be followed by a two-year period of winter and bear market, or whether they will break the cycle and continue to grow.

Several factors suggest that the upward trend could continue.

Uncertainty was triggered by the so-called shutdown in the US, when the federal government there had to suspend its activities because Republicans and Democrats in Congress could not agree on the budget for the next fiscal year. Since federal officials are on unpaid leave, there is no one to publish data on the development of the US economy. Investors in other markets are therefore keeping a close eye on financial assets such as Bitcoin, which reflect market sentiment. And these are benefiting from this.

There is also speculation as to whether cycle theory is outdated, as Bitcoin (and gradually other cryptocurrencies) is reaching an ever-increasing number of investors via ETF funds.

In the first week of October, they purchased $3.24 billion worth of Bitcoin, the second-largest volume in history.

The Trumps advise not to sell

And finally, there is the traditional phenomenon known as Donald Trump, who likes to put on a show in front of his huge audience.

Just a few years ago, he said he was not a fan of cryptocurrencies and that they were a “potential disaster.” But by 2024, he was basing his election campaign on making the US a global stronghold for cryptocurrencies.

At the end of October last year, he even stated that he was open to abolishing capital gains tax on cryptocurrencies, as “bitcoins are money, not securities.” If he succeeds, the United States would become a paradise for crypto investors.

In the spring, after a meeting at the White House, he ordered that the United States should begin building strategic reserves of cryptocurrencies seized from illegal activities. In the summer, he pushed through legislation that established clear rules for the growing industry.

Due to the president's unpredictability and his fondness for cryptocurrencies, all investors in the market are therefore closely following his statements.

In August, for example, he noted that anyone who sells Ethereum before it reaches its historic high is, to say the least, a fool.

His son Eric Trump made a similar comment at the end of September, when cryptocurrency prices were on a downward trend, saying that the last quarter of this year would be very good for cryptocurrencies and that he expected Bitcoin to rise to $1 million in the long term.

The statements from the Trump camp give rise to speculation as to whether the president will once again come up with a megalomaniacal measure (e.g., reviving the idea of abolishing taxation on cryptocurrencies) to break the Bitcoin cycle.

This narrative is supported by the fact that it is in his financial interest, as his family holds a significant portion of its wealth in the cryptocurrency business.

If this happens and prices rise steadily for the rest of the year, it would be a historic event in a way. It would mean that cryptocurrencies are becoming a more stable, mature market. However, if the turning point occurs solely due to emotions surrounding Trump, it is questionable whether this is not just a fiction and whether the bursting of the “hyped” bubble is merely being postponed.

However, it cannot be assumed with certainty that the cycle will not repeat itself despite everything. Several leading analysts still see the charts as a copy of the market development after the halving in 2020.