Bitcoin (BTC) price has already reached the bottom of the current bear market, according to a new model of market cycles.
The new hypothesis tries to predict the bottom of the next cycle and assumes that each successive downward phase in the cryptocurrency market will be weaker. The bull market is also expected to be weaker. So are Bitcoin price cycles weakening?
Parallel to the cryptocurrency market, there is a market for cryptocurrency cycle models. They serve analysts and their followers to find patterns, rationalize and predict the price of digital assets.
They represent an attempt to look deep enough into the market to uncover the fundamental mechanisms that govern it and give a perspective on long-term price action.
In today’s analysis, Be[In]Crypto looks at the most popular models and examines whether Bitcoin price cycles are still an attractive narrative for investors.
In this context, we present a new, recently published model, according to which Bitcoin price cycles are weakening, and the next decline will be only -67% against the new ATH.
Bitcoin price cycles – repetitive psychology
Bitcoin price cycles are an attractive hypothesis, stating that the same phases of the cryptocurrency market are repeated over a sufficiently long period of time.
All of them together form a complete cycle, after the end of which another cycle begins. This gives a sense of order, harmony and the temptation to predict long-term price action.
The reference point for the Bitcoin price cycles hypothesis is the classic Wall St. Cheat Sheet, which combines the cyclicality of traditional markets with the phases of investors’ psychological reactions.
Besides, one of the main premises for the cyclical hypothesis is the repetitive nature of human psychology. Investors at any given point in the cycle are somewhere on the map of the spectrum of emotional states between extreme fear/depression and extreme greed/euphoria.
Halving sets BTC price cycles
There are several leaders in the market for cryptocurrency cycle models. The most classic and natural for Bitcoin price is the model based on the halving rhythm.
It assumes that Bitcoin price cycles are mainly determined by the event of halving the reward for mining a block of the network. The halving occurs once every four years or so, depending on the speed and efficiency of the entire network.
The idea is that a reduction in the amount of BTC awarded to miners for approving blocks triggers a supply shock that translates into an increase in price in the long term. That’s why some analysts believe the bull market begins a few months after halving.
Stock-to-Flow and lengthening cycles
Another equally classic, though less popular today, model of Bitcoin price cycles is Stock-to-Flow (S2F) by pseudo-anonymous analyst PlanB.
It is built on the relation of the stock of any asset to its annual production (flow). The ratio between these two quantities is used to determine its scarcity. The greater the scarcity, the potentially higher the price.
The model has the advantage of being able to compare Bitcoin price to other assets and commodities, such as gold, diamonds, and real estate.
Unfortunately, the current degree of deviation of the BTC price from the predictions of the standard S2F model is so large that many admit that it can no longer be applied to Bitcoin cycles.
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