The Ultimate Cycle Comparison
Bitcoin Halving next week!
Dear Bitcoiners,
The highly anticipated Bitcoin Halving is just a week away! This is a truly memorable event where Bitcoin’s inflation rate will drop below Gold’s. With a growing Hodler base and the drop in new supply issuance caused by the Halving – from 900 coins a day to 450 coins a day – the scarcity of the rising digital commodity is increasing. The Halving event might bring about some extra volatility; just like the approval and actual demand for ETFs, there is a clear difference between the speculation around the Halving event and its actual impact on supply. Last week, we discussed an innovative way to estimate the actual Halving impact over the coming years. If you missed that, I highly recommend you read back.
This week, I have the ultimate cycle comparison for you! At Bitcoin Strategy, we believe that along with on-chain analysis, it's crucial to focus on cycles. Human psychology, driven by fear and greed, leads to cyclical behavior in all markets. Catalysts, like the ETFs and the Halving, influence these fear and greed levels. We’re at an unprecedented moment in Bitcoin’s history, reaching an ATH before the Halving. In this edition, we've aligned the Bitcoin cycles in the best possible ways to give you a complete picture, considering these unique circumstances
ATH before the Halving
As we approach next week’s Bitcoin Halving, this cycle stands out from its predecessors by reaching an ATH beforehand. Before comparing the Bitcoin cycles using different approaches, let’s first consider the factors that have brought us here. Understanding this context is crucial, as each cycle has its own distinct traits and unique characteristics.
ETF Approval: The Bitcoin Spot ETFs are among the most successful in ETF history. A massive demand wave came through this new gateway, which we’ve covered extensively at Bitcoin Strategy. It would have been highly unlikely to see an ATH before the Halving without this major catalyst.
Paper Bitcoin: Another factor contributing to reaching an ATH before the Halving is the subdued peak of the last cycle. The peak was likely muted by “paper Bitcoin.” Besides derivatives, which often have contracts without underlying Bitcoin, we saw “yield” platforms like Celsius and exchanges like FTX create the illusion of holding Bitcoin, without holding the actual Bitcoin. The previous cycle’s peak was the first distributed and muted peak in Bitcoin’s history. Without a blow-off top, it's consequently easier for the next cycle to reach an ATH.
Bear Market Duration: When examining the on-chain indicators across the board, we find that the last cycle's peak actually occurred in April '21 rather than November '21, even though the price was able to reach another high in November. Starting our count in April instead of November, the duration of the past bear market has been in line with previous cycles.
Bitcoin Cycles
Now that we’ve established the context for reaching an ATH before the Halving; what can we expect moving forward based on cycle analysis? Previously, we discussed how we skipped two phases due to the ETF catalyst. If we consider the 4-year cycle, we’re about 9 months ahead. What is the current best way to align cycles? Should we continue viewing cycles in the 4-year timeframe, use the Halving or other specific events like the ETF as the main catalyst, or align them by the previous ATH?
The answer is that there isn’t one best way to align cycles. With the current unique conditions, where we have an ATH that is out of sync with the 4-year cycle, we should especially consider all scenarios. Let’s explore the various cycle alignments and see what insights they provide.
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Key Insights
In the chart above, we’ve outlined the most optimistic to the most conservative cycle alignments. All alignments point to a positive outlook, whether it’s an immediate continuation of the bull market or, in the worst case, a ~200-day delay. Another key insight is that, in case of an intermission to realign with the 4-year cycle, the price is unlikely to fall further than the lower 40k range.
On-chain indicators like Short-Term Holder Supply, for now, suggest it’s more likely we’ll stay in a bull market, rather than consolidate for another 200 days. However, we need ETF demand to pick up, which has seen a decline over recent weeks. I do not pretend to know what the future holds, Gold is surging as the macro tentions are rising. What we do know is that the Bitcoin Halving is coming up and 2024 is a US election year – typically providing favorable investor conditions. Let’s therefore closely track the following important charts.
Important to watch:
Continuation of ETF Demand:
STH Supply climbing higher:
Support & Resistance Levels:
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I hope you found these insights valuable; please let me know what you think in the comments. 👊
Until the Halving! 🧡
-Root
Root, thanks for this comprehensive look at the cycles. I still think one aspect of cycle psychology is missing though. That is, the length of the bull and how it ends. Obviously, bulls end when people stop buying. But what is it that make people stop buying? There are external factors such as the macro picture, liquidity, or world effecting news. But there are also inherent factors where price itself is the signal to a sufficient number of buyers that the price has run its course. You have used metrics in other charts of value and have delineated an overvalued line. Bulls generally go well over that line. It would be an interesting starting point to use the moment when the price reaches your overvalued line for cycle synchronization. This isn’t really a full cycle view but something more like comparisons of cycle ends. That might be very useful to your readers at this point in the cycle. Thanks again for an excellent write up.
So does this mean the spiral chart could break for this cycle?