oinonen_t2025-02-02

Entering the Distribution Cycle

[A Late-Stage Bull Market] After rising 129.2 percent within the past 12 months and reaching >$100K, the leading cryptocurrency bitcoin is looking at a cycle top. Referring Ki Young Ju's recent comments: "We’re in the late stage of the bitcoin bull market, but I believe there’s still room for growth. I’d say we’re in the early distribution phase, as new retail investors are entering. Trump’s global promotional impact could extend this bull run for another couple of quarters." [Applying the Dow Theory] Dow theory has been beneficial for understanding current market mechanisms of traditional and digital assets. In a simplified way, the Dow theory divides market movements into two phases: accumulation phase, and distribution phase. Applying the Dow theory, bitcoin’s year of 2022 represented a clear distribution cycle, bringing bitcoin into a technical inflection point at the turn of 2022-2023. In 2023, bitcoin faced a new accumulation cycle (orange), which lasted through 2024, and is now shifting into a distribution cycle (turquoise). [What's Next?] Despite the approaching distribution cycle, bitcoin might still reach significantly higher spot price levels. Bitcoin’s funding rate is relatively low and comparable to summer 2024 levels. We're far from an overleveraged market, and the structure supports further spot price discovery. Axel Adler Jr recently commented bitcoin market being "not overheated, and under stable macroeconomic conditions the cryptocurrency holds potential for further growth." Bitcoin’s power-law fit sits at $87.99K, acting as the ”fair price” and lower spot support. MicroStrategy has continued its pro-cyclical purchase program in early 2025, recently adding 10,107 bitcoins to its balance sheet, and now holding a total of 471,107 units. MSTR's purchase program mirrors institutional demand and acts as a leading indicator to the underlying asset (bitcoin) itself.