My Model Says Bitcoin Will Make Its Low On …
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| By Juan Villaverde |
Last week, I said crypto asset prices were likely destined to fall into a 320-day-cycle low sometime in Q1 next year.
That analysis still holds. But within that 320-day-cycle path, we will see smaller cycles that can give us intermediate rallies.
Just like the one we are seeing right now.
This outlook hasn’t changed. From its recent low near $84,000, a spirited rebound has taken Bitcoin (BTC, “A-”) as high as $94,000 before it pulled back slightly today.
This is consistent with an 80-day-cycle rally, which likely began Nov. 21.
The good news is that this rally should extend into next Sunday at the very least. But as you celebrate near-term relief, be sure to keep the big picture in mind …
Welcome as it is, this move up is likely just a pit stop on the way to a much more meaningful bottom — expected sometime between late January and early February.
And as I said last week, confirming this scenario was contingent on seeing a material uptick in Central Bank Liquidity (CBL) right about now. That’s because CBL tends to mirror Bitcoin’s price path roughly 12 weeks in advance.
Well, I’m pleased to report …
Central Bank Liquidity Is Now Improving
Look at the blue downtrend line (above). It connects a descending series of highs in the CBL time series.
You can see how the most recent upturn in CBL has been strong. Enough so that it broke the pattern of lower highs and lower lows that goes back months.
That move confirms the CBL rebound you see just getting underway isn’t just a countertrend bounce within a broad ongoing decline.
On the contrary, it’s what T-bonds are signaling will be a major move up.
Accordingly, I expect CBL to climb much higher.
And if so, this gives us an important clue for crypto: Bitcoin’s next significant low should arrive around Feb. 12.
I have a lot of confidence in the bond market’s predictive ability. Remember the epic surge in liquidity evoked by the government’s response to COVID?
T-bonds somehow saw it coming a full year earlier — in March 2019.
How extraordinary is that?
Even more impressive: By August 2020, the bond market began to fall sharply, implying a dramatic collapse in global liquidity by June 2021. The actual liquidity peak occurred in September 2021 — only a couple of months off.
So, do I think the CBL rally currently forecast by T-bonds will indeed occur in 2026?
No doubt about it!
The Treasury market has already demonstrated its ability to forecast liquidity nearly a year in advance. Even in periods of extreme uncertainty.
And now, looking forward to 2026, it is sending a clear message: Liquidity conditions are likely to be supportive next year.
Not wildly expansionary, but supportive.
And this opens the door for crypto to reach its 4-year-cycle low. Not in late 2026, which would be typical, but potentially as early as in Q1 next year.
This is why the Treasury market and Central Bank Liquidity remain the two key tools for assessing what comes next.
And right now, they’re giving us something we haven’t had much of in quite a long while: hope.
So be sure to mark Feb. 12 on your calendar.
After that, the set up on-chain and off should shift in your favor.
Best,
Juan Villaverde
