Bitcoin (BTC) Price Cycles Weakening: The Next Bear Market Will Drop 67%

Bitcoin (BTC) price has already bottomed out in the current bear market, according to a new model of market cycles.

The new hypothesis attempts to predict the bottom of the next cycle and assumes that each successive downswing 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 dig deep enough into the market to uncover the fundamental mechanisms that govern it and provide a perspective on long-term price action.

In today’s review, Be[In]crypto looks at the most popular models and examines whether Bitcoin price cycles remain an attractive narrative for investors.

In this context, we present a new model published recently, according to which Bitcoin price cycles are weakening and the next drop will be only -67% against the new ATH.

Bitcoin Price Cycles: Repetitive Psychology

Bitcoin price cycles are an attractive hypothesis as they claim that the same cryptocurrency market phases repeat themselves 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 benchmark for the Bitcoin price cycles hypothesis is the classic Wall St. cheat sheet, which combines the cyclicality of traditional markets with the phases of psychological investor reactions.

Furthermore, one of the main premises of the cyclical hypothesis is the repetitive nature of human psychology. Investors at any given point in the cycle are somewhere on the emotional state spectrum map between extreme fear/depression and extreme greed/euphoria.

Wall St. Cheat Sheet / Source: ritholtz.com

Halving Sets BTC Price Cycles

There are several market leaders in cryptocurrency cycle models. The most classic and natural price of Bitcoin is the model based on the halving rate.

It assumes that Bitcoin price cycles are primarily determined by the event of halving the reward for mining a network block. The halving occurs about once every four years, depending on the speed and efficiency of the entire network.

Bitcoin (BTC) price halving
Source: buybitcoinworldwide.com

The idea is that a reduction in the amount of BTC awarded to miners for approving blocks triggers a supply shock that translates into a long-term price increase. This is why some analysts believe that the bull market starts a few months after the halving.

long term bitcoin price
Tradingview BLX Chart

Stock-to-Flow and elongation cycles

Another equally classic, though less popular today, model of Bitcoin price cycles is Stock-to-Flow (S2F) from a pseudonymous analyst. Plan B.

It is based on the ratio of the stock of any asset to its annual production (flow). The ratio of these two quantities is used to determine your scarcity. The greater the scarcity, the higher the price potentially.

Bitcoin (BTC) stock price will flow
Stock-to-Flow model / Source: Glassnode

The model has the advantage of being able to compare the price of Bitcoin with other assets and commodities, such as gold, diamonds, and real estate.

Unfortunately, the current degree of BTC price deviation from the predictions of the standard S2F model is so great that many admit that it can no longer be applied to Bitcoin cycles.

Bitcoin price drifts
S2F Deflection / Source: Glassnode

A more popular model until recently was the hypothesis of Bitcoin lengthening cycles by Benjamin Cowen.

It assumes that each successive cycle lasts longer, produces lower returns on investment (ROI), and is not necessarily dictated by a halving rate. It has become popular over the years, and the historical data seems to fit its assumptions well.

However, even here, the model does not seem to have withstood the reality of the sharp declines in the cryptocurrency market that occurred in May and June of this year.

According to the model, the current cycle should have had a much longer bull market phase, which, however, ended in November 2021.

The analyst already admitted in May 2022 that his model “is dead”. Despite this, it appears that some of its components, such as ROI decline and logarithmic regression, still retain their long-term validity.

New Model: Bitcoin’s Weaker Cycles

The above three models and the Bitcoin price cycles they contain do not exhaust all long-term analyst options and creativity. Among many others, for example, the circular analysis of the price of BTC or the cyclicality models that determine the legendary altcoin seasons can be mentioned.

The price of Bitcoin (BTC) enters a new cycle
Source: Twitter

The novelty of this model is the attempt to create an algorithm to accurately calculate the depth of declines during bear markets. The analyst does this not only for the current cycle, but also tries to predict the next one, which is expected to occur in 2023-27.

According to their relatively simple algorithm (y = -97.5 + 3.7*x + 0.5*x^2), the bottom of the current cycle was assumed to have already been reached with the price of Bitcoin falling 74% from the all-time high ( ATH). The fund of $17,622 in June corresponds exactly to this value.

The Next Bear Market Likely Only After BTC Price Hits $250,000

Interestingly, the model predicts that the next bear market will lead to a drop of only 67%. This is expected to happen after the price of Bitcoin has previously risen to around $250,000.

Based on the model estimates, the low point of the next bear market would be in the range of $70,000 to $80,000. This would correspond to a retest of the current November 2021 ATH at $69,000.

All the cycles to date, according to @StockmoneyL, form a large supercycle in which progressive weakness is evident.

This weakening is related to both the depth of dips in a bear market and the height of rallies in a bull market.

This view remains consistent both with the classical halving rhythm and with some elements of Benjamin Cowen’s hypothesis of lengthened cycles.

To be[In]Crypto Bitcoin (BTC) Past Analysis, Click here.

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