Bitcoin’s (BTC) price has followed a four-year cycle with consecutive bull and bear trends occuring in somewhat measurable intervals. A closer look at Bitcoin's long-term price action reveals that the run-up to the top and bottom of the previous cycles look remarkably similar. What’s more interesting is that the 2020 to to2021 cycle shows signs of following the same pattern.
Independent market analyst, HornHarris, found that the period between the bottom-to-top and top-to-bottom has been the same since 2015, 152 weeks and 52 weeks, respectively.
Even in 2013, the bear market lasted 58 weeks, only six weeks difference from the other two cycles
Bitcoin price chart with timelines of past cycles. Source: Twitter
Another resemblance with the last bottom formation is the similarity between Bitcoin’s current uptrend and the one in 2019, when the primary catalyst was a prevalent negative investor sentiment. Bitcoin price gained nearly 350% from the bottom of $3,125 and it didn’t drop below this level moving forward, marking the previous cycle’s bottom.
Four years later, the conditions have changed, but the underlying reason for the latest 30% surge in Bitcoin’s price was still the market expecting lower prices due to macroeconomic headwinds. The lack of positive sentiment and build-up of short positions in the futures market may have allowed buyers to stage a disbelief rally to hunt short-order liquidations and incite FOMO among investors who had been sitting on the sidelines.
But not all conditions are the same. Previously, the BTC whales,addresses holding more than 1,000 BTC,went on a buying spree as Bitcoin’s price started to bottom out. However, these buyers haven’t participated in the recent rally, raising concerns about its sustainability.
If history repeats itself, Bitcoin’s November 2022 lows of around $15,500 will mark the bottom of the current cycle. It would also mean that a new bullish cycle has begun, and the asset could record a new peak in October 2025.
Number of addresses with more than 1,000 BTC. Source: Glassnode
It will be interesting to see if whale buyers buy the theory of the Federal Reserve under Jerome Powell pulling off a successful soft-landing instead of a recession as a result of their flight against inflation. December’s economic data in consumer price inflation and employment numbers showed early signs of macro improvement. A few other on-chain indicators could help confirm whether this bull run is the real deal.
Short-term bullish reversal signs appear
Bitcoin has been trading around bargain purchase levels for quite some time on the longer timeframes. In the short-term, however, the risk of price dropping to new lows was high due to miner selling pressure, macroeconomic headwinds, and the fear of FTX contagion. The recent rally shows signs of on-chain signals moving into bullish territory.
Bitcoin's Realized Price metric reflects buyers' average price on moving the coins on-chain. Its price dropped below its Realized Price only thrice in the last eight years. Moreover, a breakout above this level has marked the end of the bearish trend in each of them.
Currently, the Realized Price of Bitcoin sits at $19,715. If the price holds above this level, it will encourage buyers sitting on the sidelines to join the rally.
Bitcoin’s on-chain Realized Price (yellow) and market price (black). Source: Glassnode
The indicator is used to identify bullish and bearish trends. When the price is in an uptrend, investors add to their winning positions during pullbacks, indicated when the SOPR indicator’s value stays above one. The inverse happens in a bear; bears dominate the market by selling into rallies. Thus, a crossover of the metric above the pivot at one is a potent trend reversal signal.
So far, the 7-day average transactions are still occurring at a loss, but the price is very close to flipping bullish. Based on the last retest of SOPR’s pivot, the bullish reversal will happen after a successful weekly close above $21,200.
Another reliable short-term on-chain indicator is Spend Output Profit Ratio (SOPR). It measures the profitability of Bitcoin transactions based on the price of tokens when they are added and withdrawn from specific addresses.
Entry adjusted SOPR. Source: Glassnode
Another notable development has occurred with Bitcoin miners, who were one of the most significant sellers in 2022 as the market price dropped below the production cost of Bitcoin, putting pressure on them. However, the days of miner capitulation are likely behind.
The Hash Ribbon indicator developed by an on-chain analyst, Charles Edwards, flashed a buy signal, suggesting an end to the trend of dropping hashrates with prices recovering above production costs of large to medium-scale enterprises.
Unless Bitcoin price drops below $20,000 in the near future, the market can expect the miners to start accumulating Bitcoin instead of having to sell the entire amount to cover operation costs.
The stark similarities between Bitcoin’s previous cycles and a relief from the ongoing miner sell-off should aid buyers in building a long-term bullish support level.
However, the lack of whale buying and the price reversing from the SOPR pivot level around $21,200 raises a few alarms that the sellers may start to dominate again. The on-chain support level for buyers lies around the Realized Price at $19,715.
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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