Since its creation in 2009, Bitcoin (BTC) has recorded four market cycles between a low and a new peak. The cycles have had variable extensions, from 600 days to about 1,050 days. The most recent one has just exceeded 300 days, suggesting it could last another 3 to 12 months.
If the price of Bitcoin remains stable for several months, or potentially even a year, it could lead to two consequences: strengthening the fundamental basis for the next explosive increase (a scenario similar to the one observed between 2016 and 2017), and pushing the other cryptocurrency, or altcoin, to reach new highs, as some investors predict.
Why slow growth is crucial for Bitcoin at this stage
On March 13, the price of Bitcoin was $3,596 on BitMEX. In less than six months, BTC reported a 220% increase, a far better performance than most traditional indices and assets, including gold.
The dizzying increase of Bitcoin could induce whales (individual investors who own a large amount of BTC) to collect profits. In this eventuality, the overexposed nature of the futures market could lead to a strong contraction due to an event of cascading liquidations.
However, if BTC manages to gradually recover over time and remain above the $10,000 support level, it could result in a more sustainable and prolonged bullish cycle. Dan Tepiero, co-founder of 10% Holdings, commented:
“Prepare to be patient with Bitcoin. Each bullish cycle takes longer to evolve and is less extreme as the absolute dollar value gets bigger. It may take another 6-12 months before the price exceeds the previous maximum. It should not matter, since the final price target is obscenely higher, to the delight of HODLers.”
To give an example, the last two cycles occurred near the Bitcoin halving. The second halving event in the history of cryptocurrency occurred in July 2016. BTC’s bullish cycle peaked 17 months later, in December 2017.
Bitcoin’s previous market cycles
If Bitcoin follows a trend similar to the one marked by the cycle after the 2016 halving, it could see a strong bullish movement at the end of 2021. This scenario would also be perfectly aligned with the popular stock-to-flow model, according to which BTC’s price will reach six figures at some point next year.
What do traders expect in the short term?
Considering closer horizons, some traders predict that the Bitcoin price will consolidate over an extended period of time. A pseudonym trader known as “BIg Chronis” explained that charts over longer intervals suggest a lateral movement.
“Protecting the bull cross on the daily would be ideal for bullish traders, the lateral price action can bring them in parallel without crossing, allowing the indicators on longer intervals to mitigate their decline… I think we will see relatively lateral movement for a while longer.”
Michaël van de Poppe, trader at the Amsterdam Stock Exchange, expressed a similar opinion about the market cycle, which in his opinion will be longer than the previous one:
“The funny thing is that this cycle will probably take longer than the previous one, but it will also be crazier. I like it.”
Usually, a prolonged period of stability for Bitcoin leads the altcoin market to perform very well. Kelvin Koh, partner of Spartan Black, a crypto fund based in Asia, suggested that this scenario could strengthen sentiment in the altcoin market.