Even after a steep plunge earlier in August, Bitcoin (BTC -1.40%) is still up almost 40% for the year. That's the good news. The bad news is that Bitcoin recently dipped below $60,000 again, and shows few, if any, signs of rebounding anytime soon. During the past 30 days, Bitcoin is down 11%. In fact, August is shaping up to be Bitcoin's worst month since April.
But I think many of the fears of the Bitcoin bears may be overstated. In fact, I'm predicting that the next big move for Bitcoin will be a rebound to $100,000 by year-end.
Why is Bitcoin falling?
As a first step, it's important to figure out why Bitcoin has been falling. The best explanation, from my perspective, is that inflows into the new spot Bitcoin exchange-traded funds (ETFs) are slowing, and that's putting a brake on any upward Bitcoin price action. Since the launch of the new spot ETFs in January, the steady inflow of new money into Bitcoin is what has pushed up prices. So if these inflows dry up, then it makes sense that Bitcoin is going to trade sideways or down.
Moreover, investors were obviously spooked by the August flash crash, when the price of Bitcoin and other cryptocurrencies collapsed literally overnight. So, from a sentiment perspective, it makes sense that investors are becoming much more cautious about which risk assets they are willing to put their money into. The new narrative is that investors are rushing to pull their money out of Bitcoin so that they can put it into Nvidia (NVDA 1.99%).
Image source: Getty Images.
Thus, for Bitcoin to begin its ascent to $100,000, investor sentiment needs to improve and inflows into the new spot Bitcoin ETFs need to return to their former pace. And this appears to be what is happening. During the final days of August, the spot Bitcoin ETFs posted eight straight days of positive inflows.
Key catalysts ahead
There are two key catalysts that could help to boost ETF inflows and restore investor confidence in Bitcoin. The first is the Bitcoin halving, which took place back in April, cutting the rate of new coin creation. At the time, it was heralded as the most important crypto event of the year, and was supposed to result in Bitcoin skyrocketing in price. Until now, though, the halving has been a nothing-burger, and many investors may have forgotten about it entirely.
But there is growing reason to expect that the real impact of the halving will begin to be felt as we head into the final months of the year. For example, historical evidence suggests that it takes at least 200 days after the date of the halving for Bitcoin to kick into a higher gear. And guess what: 200 days from the time of the Bitcoin halving on April 19 brings us to the end of October as the potential start date of a new Bitcoin bull market cycle.
This is the same pattern that occurred during the previous Bitcoin halving cycle in 2020. As can be seen from the chart below, Bitcoin meandered along during the summer and early fall after its halving event in May, before kicking into a new higher gear in the final months of the year. There's no guarantee this same pattern will occur again, of course, but my fingers are crossed.
Bitcoin / U.S. dollar chart by TradingView
The second key catalyst is the U.S. presidential election. Pro-crypto sentiment appears to be building on both sides of the political aisle and Bitcoin has actually emerged as a campaign issue. The greatest impact would be felt if the Republicans win the White House, because Donald Trump is the first presidential candidate ever with a pro-Bitcoin agenda.
But there is reason to think that the Democrats, too, could be persuaded to pass sweeping pro-crypto legislation that makes it much more enticing to invest in Bitcoin. Either way, Bitcoin could benefit from a so-called relief rally as investors pile back into crypto in November.
How likely is $100,000?
Admittedly, for Bitcoin to almost double in price and hit $100,000 by the end of the year, a lot of things will need to go right. But if ETF inflows revive, and if crypto sentiment once again turns bullish, it might just happen. Keep in mind, too, that there could be a number of positive surprise events -- such as China reversing its ban on crypto -- that could unlock a tremendous amount of upside potential for Bitcoin.
Throughout Bitcoin's 15-year history, a strategy of buying the dip has usually paid off for investors. And I don't think this time will be any different. This might be the last time to buy Bitcoin at such a discounted price. By the end of the year, six-figure Bitcoin could be the new normal.
