Polymarket data from September of 2024 had indicated a divergence between Donald Trump’s “perceived” election chances and Bitcoin’s price, suggesting the crypto market had “already priced in” some of the election’s risk. This, according to an update from HashKey Capital.
Historically, once the short-term uncertainty of elections subsides, the crypto market tends to “experience significant rallies,” the HashKey Capital team noted.
Hashkey Capital estimate that Bitcoin remains in the “mid-phase” of a three-year bull cycle.
According to the extensive research report, improving liquidity and the resolution of U.S. election uncertainties are expected to drive “further market gains, potentially leading to new all-time highs (ATH) in the next 3–6 months.”
Additionally, Bitcoin has historically delivered “strong Q4 returns, averaging 40% over the past decade.”
The HashKey Capital update also mentioned that these factors, combined with favorable macroeconomic conditions, “suggest that the bull market may continue its upward trajectory.”
HashKey Capital added that it has been observed that altcoins tend to demonstrate “high beta characteristics” during the three months preceding Bitcoin’s new all-time highs.
In four instances since 2016, when Bitcoin achieved “new cyclical highs, the altcoin index outperformed Bitcoin in the three months leading up to these peaks, with the sole exception occurring in Q2 2016.”
The current derivatives market has “priced in a U.S. terminal rate of slightly over 3% for this easing cycle.”
The HashKey Capital report added that as U.S. monetary easing extends into next year, they believe major altcoins with “relatively high staking yields, such as ETH and SOL, are likely to benefit.”
Additionally, staking protocols (e.g., STETH) and “delta-neutral DeFi protocols (e.g., ENA) are expected to gain from increased yield-seeking behavior in a lower interest rate environment.”
However, risks remain for altcoins in this cycle, the report cautioned.
With more projects launching with “low circulating supplies, a total of USD 155 billion will be unlocked over the next few years.”
The report added that price action may “decouple from Bitcoin as capital inflows struggle to absorb the growing supply. Therefore, identifying fundamentally and technically strong altcoin assets is more critical than ever.”
Historically, the Hashkey Capital report explained that altcoins perform well after Bitcoin dominance (BTC.D) peaks.
As Bitcoin captures market share early in a cycle, capital often “shifts to altcoins once BTC dominance fades.” This cycle benefits altcoins “as investors seek higher risk, higher reward assets.”
From a static perspective, BTC dominance (BTC.D) likely needs to “reach 62%-70% for altcoin season to begin.”
At present, BTC.D is around 57%, meaning Bitcoin’s market capitalization would need to grow by “approximately $280 billion based on the 62%-70% range.”
This implies Bitcoin’s price would need to “exceed $76,000” (at the time of writing, BTC has already surpassed the $77,000 mark).
For a 70% BTC.D, the price would have to “reach $108,000, with an average estimate of around $92,000.”
In an optimistic scenario, altcoin season is more probable when Bitcoin’s price surpasses $80,000.”
Another factor is the correlation between Bitcoin’s price surge and ETFs.
Although this is generally seen as positive, if crypto-native funds drive the rally, “capital may rotate from Bitcoin to altcoins.”
However, when ETFs lead the market, funds are “less likely to shift into altcoins because mainstream investors typically lack direct access to them.”
Instead, capital is more likely to “flow into other crypto-related stocks, which belong to two different worlds.”
