Bitcoin Monthly Chart
For this Bitcoin update, I am going to be looking at the monthly chart. The reason is that I am not interested in short-term price action. I am trying to determine to the best of my ability (which arguably might be lacking!), if Bitcoin has peaked for this macro market cycle. I also want to speculate whether we could be looking at a Bitcoin super cycle or if Bitcoin appears to be sticking to the traditional 4-year cycle. I'm not sure if traditional is the correct word to use here. I guess it depends on if you feel the 10+ years of data on the chart qualifies as a well-established pattern.
Anyway, looking at the chart you can see that I have drawn in a macro trendline. I should also mention that this is a logarithmic chart. I want to also point out that I ignored the wick from the March 2020 COVID dump. I guess I would describe the trendline as having an arch shape that at least on my chart here seems to be straightening out. I will first be presenting a case for Bitcoin sticking to the 4-year macro market cycle, then I will finish with the possibility that we have seen the end of the "traditional" 4-year market cycle.
Looking at the chart again you can see that I have marked the macro market cycle peaks. I will be assuming that the peak on November 10th is the peak for this macro (4-year) market cycle. Looking at the bottom of the chart I have the Stochastic RSI indicator. You can see that I have marked (as closely as possible) the points where the indicator dropped below the 20 level (the lower dotted line). Following the pink verticle line upwards, you can see that this occurrence has always happened after each market cycle peak. You can also see that the Stoch RSI indicator has just recently dropped below the 20 level.
Going off of past history I will be assuming that means that the peak has been set for this Market cycle. I do realize that using past price history to predict future price history is sketchy at best but for this exercise, I will be doing exactly that. I certainly will not be using any of the conclusions from this exercise as a basis for making investment decisions. I would also discourage anyone else from using it to make investment decisions.
I want to make it clear that I am in no way a technical analysis expert. I am always trying to improve but there are others like Eric Crown or Benjamin Cowen who I consider TA specialists. I follow both closely because I find their analysis very detailed and frankly amazing. That being the case, I still don't make investment decisions based on their TA alone either. I use the data that I get from them as just another data set, combined with my own and other factors to make my decisions.
Okay, sorry for the rant. Back to the chart, as I said I will be assuming that the peak in November was the macro peak for this market cycle. If it does in fact prove to be the peak this would also be more data that would point to a continuation of the 4-year market cycle. The previous two peaks occurred in November of 2013 and December of 2017. So this peak occurring in November of 2021 would line right up with the 4-year cycle.
So, assuming that Bitcoin has peaked would mean that we have now entered the macro bear market. Now we will look at the previous cycles to see how much time passed from the pink verticle line to the point at which the price touched the macro trendline. For the first cycle, it was about 18 months and about 12 months for the second cycle.
Now moving forward this is where I will be making some pretty sketchy assumptions. Anyway, if we project out from this last pink line that would put a bottom for this bear market at somewhere around $30k give or take a few thousand. The bottom would also come sometime later this year or early next year. As you can see the time from the cycle peak to when price touched the trendline was about 30% shorter following the 2017 peak as compared to the 2013 peak. There just isn't enough data to be able to determine if that is a trend. So, trying to pinpoint just when the price will touch the trendline again is a little tricky.
You can also see that after the price does touch the trendline it follows it as it trends upwards. So, if I make another huge assumption that the next time the Stoch RSI indicator will drop below the 20 level will be 4 years from this last one. That would put it around January of 2026, give or take a few months.
Based on all the assumptions so far I will make another. Because I have placed the next pink vertical line in January of 2026 I will assume that the peak for this next cycle will be about two months earlier. This is also based on the previous two cycles. That would put the peak in November of 2025, give or take a few months. It would also put the price at the peak at over $145,000. Even though I would prefer that this market cycle is extended and we would see a macro peak until later this year if something even close to this played out I would love it!
Okay now for the alternative case that Bitcoin will move away from 4-year market cycles. Obviously, I don't have any past data to use so I will be making the argument based on the evolution of the whole crypto space. Two of the more important factors in a possible cycle change are the shift in investor demographics and the expansion in use cases for cryptocurrencies.
Both are vastly different when compared to a few years ago. Institutional involvement is orders of magnitude higher when compared to a couple of years ago. We have not only seen a major increase in the number of institutional investors getting involved with cryptocurrencies but also major mainstream corporations. Visa, Mastercard, PayPal, and Square, to name a few have all made a major shift towards cryptocurrencies over the last year or so. Over the last couple of years, the number of publicly traded corporations that hold Bitcoin on their balance sheet has increased significantly. Also, El Salvador just recently officially adopted Bitcoin as legal tender. It is very likely that many more countries will follow suit.
As far as an increase in use cases for cryptocurrencies since 2017 or even 2018, probably one of the most significant is the DeFi sector. DeFi with its staking, yield farming, lending, and borrowing have vastly expanded the use case. Then there is the Play-to-Earn crypto gaming sector which is still in its infancy and should continue to grow. There also is the NFT sector and the Metaverse which are also in their infancy and continuing to expand. All of these give crypto enthusiasts and investors many more outlets where they can use cryptocurrencies.
I have a strong belief that eventually, whether it is this cycle or the next. Sooner or later as Bitcoin and the whole crypto market continues to mature there will be a change in the market cycles. I feel that the crypto market will evolve to become closer to how the stock markets trade. I'm not saying they will become even more correlated but that the crypto market will see longer more gradual bull markets and shorter, shallower bear markets. To me, it just seems like a natural progression that much of the volatility will dampen over time.
As I said, a lot of this (or all of it) is just wild speculation on my part. None of us have a crystal ball capable of seeing the future.....if you do contact me immediately! Seriously though, we are kind of just along for the ride so all we can do is to sit back and watch how it plays out.
Until my next article. Stay safe and take care!
BigskyCrypto
info@bigskycrypto.com