Data from LSEG Datastream shows that macro indicators are simultaneously emitting signals that could signal a new growth cycle for Bitcoin and the crypto market. As financial conditions become more favorable, the global money supply expands, and previous cycle patterns repeat, there is reason to believe that Bitcoin may still be in a growth phase and has not yet peaked.
The ISM Index by year. Source: LSEG
One of the most important factors is the correlation between Bitcoin and the ISM (Institute for Supply Management), an important measure of the health of the US economy. Historical data shows that Bitcoin tends to grow strongly when the ISM crosses the 50 mark. Currently, ISM is recovering, which could create a favorable macro environment for the crypto market.
Correlation between the ISM index and the price of Bitcoin. Source: LSG
Besides, the ISM-based Bitcoin pricing model also shows a close correlation between these two factors. As the ISM rises, Bitcoin tends to be priced higher, which reinforces the possibility that BTC could continue to rise if the ISM maintains its rally momentum.
Not only Bitcoin, the capitalization ratio of altcoins to Bitcoin is also showing signs of increasing again. Historically, as ISM grew and financial conditions eased, money flows tended to flow from Bitcoin to altcoins, creating an Altcoin Season. If this trend continues, investors may see an explosion of altcoins in the near future.
The ratio of the altcoin's capitalization to the total Bitcoin capitalization by year (YoY%) and the ISM index. Source: LSG
The global money supply (M2) also plays an important role. The relationship between Bitcoin and M2 suggests that BTC's strong bullish cycles often coincide with periods of expansion of the money supply. Currently, the global M2 is showing signs of growth again, which could provide more liquidity to the crypto market and provide momentum for Bitcoin's next rally.
The relationship between the global money supply (M2) and Bitcoin. Source: LSG
The Bitcoin cycle chart shows that BTC may be leaving the Boring Zone and entering the Banana Zone, the strongest boom phase in the previous cycles. In previous bull runs, Bitcoin went through a period of accumulation before experiencing strong growth in a parabolic pattern. If history repeats itself, Bitcoin may be in the stage of preparing for a significant rally.
At the same time, the Bitcoin Cycle Peak Finder (CTF) indicator has not yet reached the highest peaks of previous cycles. This could indicate that Bitcoin has not yet peaked and that there is still room for growth, at least in the short term.
Chart of Bitcoin cycles. Source: LSG
Macroeconomic factors are also supporting the positive picture of Bitcoin:
The GMI Financial Conditions Index, which has a nine-month lag relative to the ISM, has risen above 55.7, signaling that financial conditions may continue to ease, supporting risky assets such as Bitcoin.
ISM New Orders, the one-month ISM leading indicator, are rising, indicating that manufacturing demand is recovering – a positive signal for the economy and financial markets.
The macro overbought/oversold indicator has not yet touched the danger zone, indicating that the market may still have room for growth before a sharp correction occurs.
Summing up all the data, Bitcoin and the crypto market are facing a critical phase. The recovery of the ISM, the expansion of the M2 money supply, easing financial conditions, and previous cyclical patterns are all supporting a new round of growth. If history repeats itself, Bitcoin may not have peaked yet and there is still room for growth, while cash flows may begin to shift to altcoins, creating an Altcoin Season.
Investors need to keep a close eye on overbought/oversold indices to manage risk, but for now, macro factors are favoring a continued growth scenario for Bitcoin and the crypto market.