Bitcoin’s Perfect Storm: Why the Best is Yet to Come

This Isn’t Just Another Cycle

After Bitcoin’s meteoric rally from $60,000 to $95,000, some voices have started wondering whether we are once again nearing the cycle top. In particular, looking at chart patterns and past cycle dynamics most analysts place this cycle’s top around the mid $100k’s range. However, taking a closer look at why the price is moving it is hard to believe that the price will stay there for long. The combination of factors propelling the Bitcoin market forward are unprecedented, and thus it is difficult to understand where prices could go this time. This could be not just another cycle, but the dawn of a completely new paradigm.

To understand the reasoning behind this, one only needs to examine the current tailwinds propelling the markets right now: A new government in the United States that promises clarity and opportunity for digital assets. A ground-breaking initiative proposing Bitcoin as a national reserve asset for the United States. A new wave of corporate adoption redefining the role of cryptocurrencies in business strategy. And now, even China could be softening its stance, with a Shanghai court recently recognizing Bitcoin as legal property, potentially hinting at a policy shift.

Adding to this are unique conditions within the mining ecosystem. Bitcoin’s price is rising faster than the network hashrate, creating a window of increased profitability for miners. Transaction fees are spiking as network activity surges, further boosting miner revenues. At the same time, ASIC hardware prices remain suppressed, offering an exceptional opportunity for miners to scale operations before prices inevitably skyrocket.

In this article we will examine all of these factors in detail, and comment why we think that they will propel Bitcoin higher than most people expect.

National and State Bitcoin Reserves

Perhaps the most important tailwind for Bitcoin this cycle is the proposed United States National Bitcoin reserve. Spearheaded by lawmakers such as Senator Cynthia Lummis, the plan includes purchasing up to 1 million Bitcoin incrementally over a five-year period and holding it for at least two decades. Advocates argue that this reserve would not only diversify the country’s financial assets but also protect the dollar’s global dominance. This would be by far the biggest single purchase of Bitcoin in history, and would absorb around one third of the Bitcoin that is considered liquid today. No matter how much you believe in the “buy the rumour, sell the news” idea, the fact is that these purchases have not started today, and thus their effect on the price has not yet been felt.

In addition to federal initiatives, several U.S. states could by taking independent steps to establish their own Bitcoin reserves. This month, the state of Pennsylvania introduced the Strategic Bitcoin Reserve Act, and other states such as Wyoming ve Texas could soon follow a similar path. The introduction of Bitcoin into the state treasuries of these states would inject billions of dollars into the market. Moreover, governmental strategies to mine Bitcoin in order to stabilize the power grid are becoming more popular, encouraging national and regional governments to start their own Bitcoin reserves. This is the case in places such as Switzerland, or Japan where electricity suppliers are already running Bitcoin mining pilots.

Government interest in Bitcoin is a feature unique to this cycle, and it represents a shift in how digital assets are perceived at the state level. If nation states all over the world start allocating a percentage of their reserves (gold, foreign debt, foreign exchange) to Bitcoin, they would inject unprecedented volumes of capital into the market. These actions not only would greatly inflate the price, but also enhance Bitcoin’s legitimacy as a global reserve asset.

Corporate Interest in Bitcoin

Corporate adoption of Bitcoin has regained momentum, with companies across industries recognizing its strategic value as a treasury asset and investment. Leading the charge is MicroStrategy, whose Executive Chairman, Michael Saylor, has orchestrated one of the most aggressive Bitcoin acquisition strategies in history. Saylor frequently describes Bitcoin as “digital gold,” emphasizing its unique qualities as a long-term store of value.

Since August 2020, MicroStrategy has accumulated close to 400,000 Bitcoin, making it the largest corporate holder of the cryptocurrency. But Saylor is far from done, as he has an ultimate goal of accumulating as many Bitcoins as possible. Inspired by this, MicroStrategy completed in September 2024 Notably a $1.01 billion offering of 0.625% convertible senior notes due 2028, with plans to use the net proceeds to redeem existing debt and acquire additional Bitcoin. Later, In October 2024, MicroStrategy announced its ambitious “21/21 Plan,” aiming to raise $42 billion over the next three years—split evenly between equity and fixed-income securities—to fund further Bitcoin purchases.

At current prices, these purchases would net an additional 450,000 Bitcoin, but the price is unlikely to stay at these levels through that amount of buying. There simply isn’t enough Bitcoin on the market. However, Microstrategy is not the only company actively pursuing a Bitcoin reserve. Only in November 2024 several other companies have announced big Bitcoin purchases. Including Marathon Digital, MetaPlanet ve Semler Scientific, a medical device company. Together they have bought a total of 23,000 Bitcoin, worth over $20 billion at current prices.

Companies adopting a Bitcoin reserve strategy not only bring legitimacy to the asset but also create significant demand that drives prices higher. The ripple effects of these corporate purchases could lead to a cascade effect, where more businesses, inspired by the success of early adopters, enter the market and further amplify Bitcoin’s upward trajectory.

China: The Sleeping Giant Awakens

China has always had a huge influence in the Bitcoin market. Historically, China has dominated Bitcoin mining, accounting for over 70% of the global hashrate at its peak. This supremacy stemmed from a combination of low electricity costs, access to cutting-edge hardware, and a thriving entrepreneurial spirit. However, the Chinese government took incremental steps to undermine the adoption of Bitcoin and other cryptocurrencies in their country. This resulted in repeated “China Ban” events that crashed the market cycle after cycle.

Although in 2017 China shut down all local cryptocurrency exchanges, probably the harshest ban came in 2021, when all trading and mining was officially banned in China. The 2021 ban had a profound effect on the global Bitcoin network. Mining operations were forced to relocate, leading to a sharp decline in Bitcoin’s hashrate. Countries like the United States, Kazakhstan, and Russia emerged as new mining hubs, but the transition was not without challenges. The crackdown also sent shockwaves through the market, contributing to a significant price correction as investors grappled with the implications of China’s exit.

Fast forward to 2024, and there are signs that China may be rethinking its stance. In April, Hong Kong took a significant step in the cryptocurrency sector by launching its first spot Bitcoin and Ether exchange-traded funds (ETFs). These ETFs, introduced by asset managers such as Bosera Asset Management and China Asset Management (Hong Kong), are among the first in Asia to offer direct exposure to these digital assets.

Moreover, A Shanghai court recently ruled that Bitcoin qualifies as legal property, granting it protection under Chinese law. While this ruling does not equate to an official endorsement of cryptocurrency, it marks a significant shift in narrative. Analysts believe this could pave the way for a more pragmatic approach to regulation, particularly as China seeks to maintain its competitive edge in blockchain technology.

China’s potential re-engagement with Bitcoin would be a game-changer. Its massive economy and investment appetite could channel great amounts of capital into Bitcoin, revitalizing its position as a key player in the ecosystem. The effect this would have on Bitcoin price is hard to estimate, but judging by the price crashes the China Ban stories caused, we can expect it to be very bullish.

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The forces influencing the Bitcoin market today are completely unprecedented. Moreover, a cycle like this is very unlikely to repeat. Once nation-states adopt Bitcoin and establish reserves, the window for ground-floor adoption will have passed. The adoption curve will mature, and the dynamics that make today’s environment so extraordinary will evolve into something new. In other words, this cycle is unique.

This is a tipping point for Bitcoin and its place in the global economy. Governments are recognizing its strategic value as a reserve asset, corporations are building it into their treasuries, and innovative approaches are weaving it into critical infrastructure like energy grids. The scale and diversity of these developments suggest that Bitcoin is evolving from a speculative asset into a cornerstone of the financial system.

For investors, this is the opportunity of a lifetime. With Bitcoin poised to transition from a niche investment to a global reserve asset, the potential upside is incalculable. But time is of the essence. As adoption deepens and reserves are established, the accessibility and dynamics of Bitcoin’s market will shift. Those who act now stand to benefit from this once-in-a-lifetime transformation.