Quant fund says bitcoin is near a major inflection point as rare onchain signals align

The firm’s outlook stands in contrast to cautious market sentiment following months of subdued price action. Many popular crypto voices online have voiced concern about the future of the largest crypto asset on the market.

Billionaire hedge fund manager Philippe Laffont earlier this week said he has become “a little bit more worried” about bitcoin’s future, especially with increasing opportunities for risk investments. Last month, billionaire investor Mark Cuban said he sold most of his bitcoin as it failed to act as a hedge during geopolitical turmoil and dollar weakness.

But Sullivan argues investors have become too focused on narratives rather than market mechanics.

“Narrative is nothing more than people trying to explain why a condition exists or persists instead of asking the correct question, which is how,” he said.

One of the biggest puzzles, according to Sullivan, is bitcoin’s breakdown in its historical relationship with global liquidity.

He said bitcoin previously tracked changes in global money supply, or global M2, with a relatively high degree of correlation. That relationship has now diverged for roughly nine months, according to his data.

That disconnect extends beyond bitcoin, with Sullivan noting that precious metals have also failed to respond as historical macro relationships would suggest.

Instead of macroeconomics, he believes structural changes in crypto markets since the launch of U.S. spot bitcoin ETFs have altered price behavior and created a market structure that suppresses volatility by encouraging hedging activity.

Despite muted prices, Sullivan sees several fundamental indicators improving beneath the surface. He pointed to rising wallet activity, growing bitcoin holdings moving off exchanges and continued strength in network metrics.

“The backdrop of anybody who pays attention to on-chain for astute patient prudent capital for raw beta exposure, it’s about as attractive a risk reward as we’re going to see,” he said.

Still, Sullivan stressed that he does not believe the bear market has definitively ended. “I do not think the bear market is over, because I’m looking at the fractals,” he said. “I want to see a completed pattern. I do not see that yet.”

Until bitcoin either reclaims key resistance near $82,000 or experiences what Sullivan views as a final capitulation, he expects investors to remain skeptical, even as the data increasingly points toward a potential turning point.