The Ultimate Bitcoin Market Cycle Cheat SheetIn this post, I'll be providing an explanation on market cycles referring to specific time periods and fibonacci support and resistance for key lows and highs.
This post is not financial advice. This is for educational and entertainment purposes only.
This post was inspired by @CryptoCon_ on twitter.
Time Periods Explained
- The chart may appear extremely messy, but let's break everything down one by one.
- I first marked all November 28ths of every year on the chart, starting from 2012.
- We can divide each cycle into a span of four years:
- The first cycle lasting from Nov. 2012 to Nov. 2016,
- The second cycle lasting from Nov. 2016 to Nov. 2020,
- The third cycle lasting from Nov. 2020 to Nov. 2024,
- and the fourth cycle beginning in Nov. 2024, ending in Nov. 2028.
Again, keep in mind that this is an extremely speculative approach, based on the premise that what happened in the past, will continue to happen in the future in a similar manner.
We can divide each of the cycles into 4 different phases.
Phase 1: New All Time Highs
- The first phase is the phase of a new all time high.
- At the end of the first phase, Bitcoin marks its new all time highs.
- Such was the case in 2013, 2017, 2021, and I expect it to be the case in 2025 as well.
Phase 2: Bear Market
- The second phase is the bear market phase.
- After we see new all time highs, we start to see a decline.
- In 2014, Bitcoin corrected 78% from its all time highs,
- 85% from its all time highs in 2018, and 75% in 2022.
Phase 3: Accumulation
- This is a phase of accumulation.
- However, this is not to say that we will only see sideways action.
- From 2014 to 2015, we saw a classic price action of accumulation,
- and from 2018 to 2019, we saw a textbook accumulation pattern, followed by an echo bubble.
- However, it is imiportant to note that this echo bubble (or more specifically, its burst) is what set up the foundation for a massive bull rally that led to new all time highs.
- According to this cycle, we are currently seeing Phase 3, where I expect a similar echo bubble to take place. I’ll elaborate more on the current status later.
Phase 4: Recovery
- This is the phase of recovery. This is where we know that the price has bottomed out already, and that we set off to rally towards new all time highs.
- Interestingly enough, all Bitcoin halving events took place in the 4th phase of this cycle classification.
Estimates for Cycle 4
- For the current cycle (cycle 4), I believe that the echo bubble thesis is in play.
- The Fed cannot taper forever, and there is still enough liquidity to be injected into risky assets.
- Despite Bitcoin moving from $16k to $23k in a matter of days, the interest from the general public is nonexistent.
- I believe that a move to 30k is highly likely, and that depending on market situations, we may even see a move up to $45k in the end.
Comparison of Past Echo Bubble
- Let’s compare the current situation to that of the echo bubble in 2018-2019.
- In 2018-2019, we saw Bitcoin rally 268% in an echo bubble. A move from $16k to $45k, today’s echo bubble, would account for a 211% move.
- As for the degree of correction, in 2018-2019, we saw the price slash in half once again - a 56% downward move.
- Taking that into account, and applying the same figure in today’s market situation, that would mean a correction from $45k to $23k.
- If we trace fibonaccin lines based on this speculation, this gives us a target price of $105k per Bitcoin by 2025.
- As for the bear market that will follow, we can expect a bottom to form around $36k, although it’s likely that prices will almost definitely hover below this level.
Statistics
- Let’s take a look at some patterns we can spot in terms of statistics:
- In the first cycle, Bitcoin dropped 77.99% from its all time highs
- In the second cycle, Bitcoin dropped 83.64% from its all time highs
- In the third cycle, Bitcoin dropped 76.64% from tis all time highs
- Assuming that Bitcoin drops 75-85% during the bear market after peaking at new all time highs, anticipating a 65% drop in 2026-2027 would be a conservative, yet realistic estimate.
- As for the returns Bitcoin provided every cycle;
- In the first cycle, Bitcoin delivered 43,236% returns from the lows to highs.
- In the second cycle, it delivered 9,134%, which is a 78% reduced figure compared to the previous cycle.
- In the third cycle, it delievered 2,102%, a 77% reduced figure compared to the previous cycle.
- In the fourth cycle, the current cycle, if it reaches $105k all time highs, it would be delivering a 524% return from its lows, which is a 75% reduced figure compared to the third cycle.
Conclusion
In this post, I take a very rudimentary, speculative, yet simple and direct approach in analyzing Bitcoin’s cycle through this specific framework. This analysis aims to provide a general understanding of when things happen, and to what degree they take place. Based on this framework, I believe that we could see an echo bubble take place in 2023, with Bitcoin reaching $45k, before it corrects down to $23k. Around the end of 2023 to 2024, we would see a phase of recovery in which Bitcoin slowly crawls back up, until it reaches new all time highs of $105k in 2025 before correcting down below $36k in 2027.
If you like this educational post, please make sure to like, and follow for more quality content!
If you have any questions or comments, feel free to comment below! :)
