Bitcoin is currently at a critical juncture, with investors observing whether historical trends will play out once again. Nearly six months have passed since the fourth Bitcoin halving, and Hashdex Research reveals that Bitcoin is now approaching a pivotal phase, where, according to previous cycles, prices may start to rise after a prolonged period of consolidation.

Will historical cycles repeat themselves?

There are numerous key factors influencing this potential market shift. According to a report by the research team at asset management firm Hashdex, these include recent interest rate cuts by major central banks, such as the Federal Reserve's 50 basis point cut in mid-September, China's monetary easing and stimulus measures, and the upcoming United States presidential election.

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These factors could create a favorable environment for a potential surge, similar to previous halving cycles, where prices rose significantly in the months following the event.

At the end of the third quarter, volatility in the cryptocurrency market was relatively stable, with Bitcoin's volatility below 50%, and Ethereum and Solana also close to similar levels. These lower volatility rates indicate the maturity of the industry, with only a temporary spike in volatility caused by the unwinding of the yen carry trade at the beginning of August, which affected not only Bitcoin but all major asset classes globally.

As the fourth quarter of 2024 begins, there is reason to expect an increase in overall volatility in cryptocurrencies, especially if prices start to show positive fluctuations. Hashdex Research notes that Bitcoin investors continue to accumulate assets; Bitcoin prices fluctuated between $54,000 and $69,000 in the third quarter. By the end of the year, Bitcoin's dominance was strengthened, accounting for 54% of the digital asset market.

Bitcoin's Recovery So Far

Bitcoin started the third quarter of 2024 on a positive note, rising by 5.3% in July due to increasing optimism surrounding the potential approval of an Ethereum ETF and renewed confidence in Trump's election prospects, which were supportive of cryptocurrencies.

However, this upward momentum was hit in August when the Bank of Japan unexpectedly raised interest rates, leading to a broad sell-off in major asset classes. This ultimately resulted in a 10% drop for Bitcoin.

September also began on a bearish note, as market confidence in a Trump victory waned and U.S. employment data suggested a potential recession, dampening market sentiment. However, the situation changed in mid-September, sparking investor optimism and helping Bitcoin to recover. The cryptocurrency ended the month with an 8% gain, resulting in a cumulative total return of 2.5% for the third quarter.Over the past seven days, Bitcoin has appreciated by more than 5% and is currently trading at over $65,650.

In terms of the mentioned spot ETFs, the most noteworthy is that the acceptance of Bitcoin by the global investment management giant BlackRock is crucial in the cryptocurrency sector. In January of this year, the company launched a spot Bitcoin ETF, pushing the price of this cryptocurrency to an all-time high. It repeated this trick in July by launching a spot Ethereum ETF to expand its digital asset portfolio. Although the latter has only attracted moderate inflows compared to Bitcoin, the company still considers it a moderate success.

Is Bitcoin = Gold?

In this regard, BlackRock CEO Larry Fink stated that Bitcoin is an asset class and compared its investment potential to gold. He emphasized in a conference call: "We believe that Bitcoin itself is an asset class. It is an alternative to other commodities such as gold. BlackRock is discussing potential allocations with global institutions."

Fink also emphasized that the future success of digital assets will not depend solely on regulation. He claimed that liquidity and transparency will be more critical in determining market evolution. The CEO compared the current state of virtual assets to the $11 trillion mortgage market. He pointed out that cryptocurrencies are still in their infancy, but they may experience similar growth as better data and analysis become available.

He said: "We have seen this in the mortgage and high-yield markets before. It started slowly, but as better analysis and data were introduced, the market gained broader acceptance."

Fink also talked about the digitization of national currencies. He specifically mentioned the potential of the digital dollar and its role. He highlighted what he considers successful cases of India and Brazil adopting the technology.

In addition, Fink believes that the integration of artificial intelligence and improved data analysis may drive the expansion and broader acceptance of the digital asset market.

His remarks coincided with a surge in inflows into spot Bitcoin ETFs. October 14th was one of the strongest days for these financial products since their launch in January. Data from Farside Investors shows that on that day alone, spot Bitcoin ETFs attracted $555.9 million in new inflows. BlackRock's own IBIT ETF attracted $79.5 million in inflows, second only to Fidelity's FBTC and Bitwise's BITB, with the former attracting $239.3 million in inflows and the latter attracting $101.1 million in inflows.