Bitcoin: The Ultimate Market Cycle Theory Explained
In this post, I'll be breaking down Bitcoin's market cycle theory, explaining my perspective on the target and time period I have in mind for this bullish rally. If you've been keeping track of my other posts, you'll notice that I've been very clear with the fact that the overall trend remains bullish on Bitcoin, as much as the short term trend may appear bearish.
You can view my latest post, where I cover Bitcoin's daily chart here:
Bitcoin: The Beginning of a Second Rally
Disclaimer: This is not financial advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.
Bitcoin's Price Target Analysis / Explanation
- This is a model that was inspired by that of DigitalKM on Twitter.
- We can first arbitrarily divide Bitcoin's market cycle into three: the first cycle from 2010-2013, second cycle from 2013-2017, and the current third cycle.
- We can then look at the fibonacci retracement levels based on the major pullbacks/corrections that took place during each market cycle.
- What's interesting to note is how the 1.618 level initially plays a key level of resistance, but acts as the bottom support for the coming (next) cycle.
- We can also see a pattern in which the market cycle peaks near the 2.272 fib resistance.
- As such, given that price actions tend to repeat, we can expect a huge initial rejection at the 1.618 fib level, around 63k (which is exactly what happened), and a continuation upwards as we peak around the $200,000 mark for this cycle.
Now that we have a rough estimate of where this cycle might end, then comes the big question: when exactly could we expect this market to top off?
Bitcoin's Cycle Duration Analysis / Explanation
- So there are two theories I initially had in mind for Bitcoin's market cycle duration.
- The first theory is a case in which we see the cycle's top around December 2020.
- Historically, all market cycle tops have peaked out in December, so it would make sense to see a parabolic move up to the top by the end of the year.
- For a detailed explanation on this theory, check out my other analysis I posted on Nov 16, 2020: Bitcoin: Long Term Breakout Projection
- The second theory for the cycle duration is based on Bitcoin's halving events and cycles.
- After the btc halving in 2012, the rally lasted 372 days up to Nov 2013.
- The second halving in 2016 lasted 520 days, up to Dec 2017.
- In terms of time span, this is a 39% increase in the duration of the bull run.
- So assuming that we apply the same increase in duration for this bull run, we’d see the rally last 722 days, which would end around May of 2022.
- This aligns with Benjamin Cowen's model as well, where we see an extended duration for every Bitcoin cycle, and diminished returns.
Conclusion
Predicting the market is impossible, but as traders and investors, we need to understand the overall picture and understand market cycles in order to best position ourselves within a bull market backed by huge momentum. I believe that Bitcoin's price target of $200,000 by May 2020 is one of many highly probable scenarios based on the technicals of its price action, as well as the market's reaction to Bitcoin's supply change based on halving events.
If you like this analysis, please make sure to like the post, and follow for more quality content!
I would also appreciate it if you could leave a comment below with some original insight.
You can view my latest post, where I cover Bitcoin's daily chart here:
Bitcoin: The Beginning of a Second Rally
Disclaimer: This is not financial advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.
Bitcoin's Price Target Analysis / Explanation
- This is a model that was inspired by that of DigitalKM on Twitter.
- We can first arbitrarily divide Bitcoin's market cycle into three: the first cycle from 2010-2013, second cycle from 2013-2017, and the current third cycle.
- We can then look at the fibonacci retracement levels based on the major pullbacks/corrections that took place during each market cycle.
- What's interesting to note is how the 1.618 level initially plays a key level of resistance, but acts as the bottom support for the coming (next) cycle.
- We can also see a pattern in which the market cycle peaks near the 2.272 fib resistance.
- As such, given that price actions tend to repeat, we can expect a huge initial rejection at the 1.618 fib level, around 63k (which is exactly what happened), and a continuation upwards as we peak around the $200,000 mark for this cycle.
Now that we have a rough estimate of where this cycle might end, then comes the big question: when exactly could we expect this market to top off?
Bitcoin's Cycle Duration Analysis / Explanation
- So there are two theories I initially had in mind for Bitcoin's market cycle duration.
- The first theory is a case in which we see the cycle's top around December 2020.
- Historically, all market cycle tops have peaked out in December, so it would make sense to see a parabolic move up to the top by the end of the year.
- For a detailed explanation on this theory, check out my other analysis I posted on Nov 16, 2020: Bitcoin: Long Term Breakout Projection
- The second theory for the cycle duration is based on Bitcoin's halving events and cycles.
- After the btc halving in 2012, the rally lasted 372 days up to Nov 2013.
- The second halving in 2016 lasted 520 days, up to Dec 2017.
- In terms of time span, this is a 39% increase in the duration of the bull run.
- So assuming that we apply the same increase in duration for this bull run, we’d see the rally last 722 days, which would end around May of 2022.
- This aligns with Benjamin Cowen's model as well, where we see an extended duration for every Bitcoin cycle, and diminished returns.
Conclusion
Predicting the market is impossible, but as traders and investors, we need to understand the overall picture and understand market cycles in order to best position ourselves within a bull market backed by huge momentum. I believe that Bitcoin's price target of $200,000 by May 2020 is one of many highly probable scenarios based on the technicals of its price action, as well as the market's reaction to Bitcoin's supply change based on halving events.
If you like this analysis, please make sure to like the post, and follow for more quality content!
I would also appreciate it if you could leave a comment below with some original insight.
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