Analysis of Bitcoin's Trend in the Second Half of the Year

In last Saturday's online discussion, many readers asked me about my views on the upcoming market trends as usual.

In previous articles, I shared a new perspective:

I believe that in the near future (at least for the remainder of this year), Bitcoin and the crypto ecosystem should be viewed separately, as the factors driving their movements have diverged. This divergence is likely to lead to noticeable differences in their trends.

So today, this article will first share my views on Bitcoin's performance in the second half of the year.

In earlier articles, I stated that Bitcoin is the largest collectible in the crypto ecosystem. This collectible should ideally benefit from the value spillover caused by the prosperity of the crypto ecosystem—this is the healthiest and most sustainable driving factor.

However, in this current trend, due to the lack of refreshing and sustainable innovations and applications in the crypto ecosystem, Bitcoin's recent rise has not primarily stemmed from value spillover from the crypto ecosystem, but rather from the bullish sentiment of traditional financial capital (especially that led by Wall Street).

This bullish sentiment is clearly positively correlated with risk assets (the most typical being U.S. stocks).

I do not foresee any significant changes in this positive correlation in the short term (at least in the second half of the year).

Therefore, if the crypto ecosystem itself does not present disruptive and sustainable innovations and business models in the second half of the year, it is likely that Bitcoin's performance will still be strongly influenced by U.S. stocks.

Judging the performance of U.S. stocks in the second half of the year is quite complex.

On one hand, U.S. stocks are certainly not cheap right now. This market has been on a nearly 17-year continuous rise since the 2008 financial crisis. Such a long and strong bull market is rare in U.S. history.

Can such a market keep rising forever?

Impossible.

I have always believed in a common sense: there is no market that only goes up without ever going down. Another myth that ran parallel to U.S. stocks, but had a bull market even longer and stronger, the "only goes up" Chinese real estate market, has already collapsed, and the aftermath is devastating.

Common sense has no exceptions.

On the other hand, saying there is a significant bubble may not be entirely accurate, as the seven giants driving the strong growth of U.S. stocks currently have clear performance support, so their fundamentals remain solid.

Thus, this market is quite strange. But the more it is like this, the more I feel this market is dangerous—it could drop at any time, but it is hard to predict when it will happen.

However, if U.S. stocks enter a bear market, Bitcoin is also likely to experience a significant decline.

Additionally, Bitcoin's performance in this round of market trends is quite different from the past:

In previous trends, once Bitcoin fell more than 20% from its peak, it would directly enter a bear market, lingering at the bottom for several years until the next bull market began.

However, this time, after Bitcoin reached a new high of over $100,000, despite subsequently dropping more than 20% to below $80,000, it miraculously rebounded close to the previous high in just a few months. Such a strong rise occurred without any internal driving force from the crypto ecosystem, relying solely on the sentiment from U.S. stocks.

Many people see this as a good sign, but I see it as depleting Bitcoin's bullish sentiment.

This bullish sentiment itself is not easy to sustain and last long, and with such depletion, how much can still support its continued rise in the future?

Therefore, even if U.S. stocks continue to rise in the second half of the year, I believe Bitcoin's increase will likely be limited. I cannot agree with the predictions that it will rise to hundreds of thousands of dollars by the end of this year.

Thus, I hold a very cautious attitude towards Bitcoin's performance in the second half of the year. Even if it reaches new highs, it is not worth celebrating, let alone being nostalgic. On the contrary, the higher it goes, the more vigilant one should be about the potential for a sudden drop.

Of course, if the crypto ecosystem can produce miracles in the second half of the year, generating disruptive innovations and applications, then Bitcoin's rise would follow a different logic.