Something remarkable is happening with Bitcoin – a pattern we’ve seen during previous cyclical recoveries when the U.S. economy reaccelerates after cooling down.
This signal has historically preceded major Bitcoin moves.
By looking at an indicator called the PMI, we can see what the US economic cycle looks like over time.
Since Bitcoin’s birth, it has tracked this economic indicator remarkably closely.
Rising PMI indicates accelerating economic activity, consistently corresponding to Bitcoin’s strongest periods.
Falling PMI suggests economic deceleration, typically marking Bitcoin’s declines.
As a young, volatile asset with relatively small market cap, Bitcoin behaves like a high-risk, economically sensitive investment rather than a safe haven like gold.
Wall Street likely still views it this way, making economic conditions crucial for price action.
Since March 2021’s extreme PMI peak, the PMI has declined significantly, hovering around 50 – indicating neither acceleration nor deceleration.
This sideways movement explains Bitcoin’s lackluster performance during this period, but there could be a potential shift soon.
US ISM Purchasing Managers Index and Bitcoin
Signs of Economic Acceleration
The Macro backdrop has shifted dramatically in recent months.
The Federal Reserve has been lowering rates from high levels outside of a recession – something seen only 3 times in 60 years: 1967, 1985, and 1995.
Fed Funds Rate and Recessions
In each case, the PMI turned up after about 18 months, signaling economic reacceleration.
Today, 18 months after the last rate hike, we’re seeing similar conditions.
This could see the PMI move higher and propel Bitcoin into another parabolic move like the past cycles.
Fed Funds Rate, US ISM Purchasing & Managers Index and Recessions
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The Oil Price Warning Signal
While conditions look favorable, believe it or not, oil prices are very crucial for Bitcoin’s cycles.
The last 2 major Bitcoin peaks coincided with rising oil prices.
Bitcoin and Oil’s Percent Difference Between Price and 200-MA
And this relationship isn’t coincidental.
Historical analysis shows every major Bitcoin bull market occurred during periods of stable or declining oil prices, and the opposite is also true.
Bitcoin and Oil’s Percent Difference Between Price and 200-MA
Oil impacts markets in 2 fundamental ways:
Direct Impact: Higher oil prices reduce consumer spending, slowing economic growth and hurting risk assets like Bitcoin.
When people spend more on fuel, they have less for other investments, directly affecting market liquidity and overall economic growth potential.
Indirect Impact: Rising oil prices often lead to higher interest rates through inflation.
Historical data shows quite a close correlation between oil prices and long-term interest rates.
Higher rates encourages saving over investing in risk assets like Bitcoin, creating additional headwinds for crypto markets.
US Oil and 10-Year Treasury Yield
Recent oil prices have ticked up for the first time since early 2024.
While not yet concerning, sustained increases could signal caution, particularly if economic acceleration drives energy demand higher.
Bitcoin and oil’s Percent Difference Between Price and 200-MA
Bitcoin’s Technical Picture
If we look at Bitcoin’s technical structure, it still remains pretty constructive.
It recently broke out and successfully retested key trend line resistance, prompting us to:
- Re-enter a Bitcoin long
- Initiate a position in Coinbase, a major U.S. crypto exchange
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