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Approaching Distribution Cycle
[Entering Q4] On Wednesday this week, bitcoin will enter the fourth and last quarter of the year, which has historically been positive for digital assets. Q4 will likely see elevated volatility: The leading cryptocurrency, and other tokens in correlation, will probably continue to reach new all-time highs, supported by Q4 seasonality. [Dow Theory and Bitcoin] 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 and distribution. 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, which has lasted through 2024 & 2025, and we're now approaching a new distribution cycle. [Accumulation and Distribution] Despite the approaching distribution cycle, bitcoin might still reach significantly higher spot price levels. Bitcoin’s funding rate on Binance is relatively low and comparable to mid-2024 levels. We're far from an overleveraged market, and the structure supports further spot price discovery. CryptoQuant’s CEO Ki Young Ju recently mentioned that bitcoin perp whales are long heavily on OKX, Bybit, and HTX. According to him, the taker buy ratio on OKX is the highest since January of 2023. [Undervalued Bitcoin] Institutional demand remains robust: Strategy (MSTR) has continued its pro-cyclical purchase program through 2025, now holding a total of 639,835 units. MSTR's purchase program acts as a leading indicator to the underlying asset (bitcoin) itself. Charles Edwards recently commented on bitcoin, mentioning the energy value based “fair price” being at least $145,000. Bitcoin’s power law model is currently positioned at $130,000, showcasing a sizeable upside for the asset. Both models indicate bitcoin still being undervalued.