RocketBomb

The cyclic nature of Bitcoin's price

Long
RocketBomb Updated   
BITSTAMP:BTCUSD   Bitcoin
Hello, dear friends! Much has been said about Bitcoin cycles, and you've seen many charts, including mine! But today, I'll summarize everything that has been said before: briefly and clearly!So...

What Defines the Bitcoin Market Cycle?

The Bitcoin market cycle signifies the repetitive trend of price movements within the Bitcoin market, marked by alternating phases of appreciation and depreciation. These fluctuations stem from the perceptions and actions of market participants, involving buying and selling, and are influenced by various factors including market sentiment, regulatory shifts, technological advancements, and broader economic conditions.

Historically, Bitcoin has adhered to a four-year cycle closely tied to Bitcoin halving events, occurring roughly every four years. A halving event entails a 50% reduction in the Bitcoin reward miners receive for validating transactions; consequently, the rate of Bitcoin supply growth slows down. This often triggers a significant price surge, assuming the demand for Bitcoin either remains constant or increases post-halving. The upcoming halving is slated for April 2024, where the block reward will decrease to 3.125 bitcoins.

The chart below illustrates the cyclic nature of Bitcoin's price and its historical patterns.



What Constitutes the Phases of the Bitcoin Market Cycle?

Phase 1 – Accumulation
This phase emerges when prices are low, yet there are early indications of growth. It's a period where buyers accumulate Bitcoin at lower prices, representing a pinnacle of financial opportunity.

Typically, bearish sentiment prevails in the market, resulting in low trading volumes and prices fluctuating within a narrow range, often near the bottom.

Phase 2 – Continuation (growth)
During this phase, the price continues its ascent towards the all-time high. Historically, a halving event occurs here, coinciding with diminishing exchange reserves as buyers stockpile supply in anticipation of surging prices and new record highs.

Phase 3 – Parabolic (bubble)
As the price surpasses the previous all-time high, it begins to rise exponentially, leading to a new all-time high that significantly exceeds the previous peak. This phase is marked by extreme volatility, with rapid price spikes followed by substantial corrections.

Sell volume increases as some investors lock in profits, while others continue buying, believing the bull market has further potential. Consequently, price volatility diminishes as buying and selling volumes begin to balance, amid a backdrop of overconfidence. Many investors may perceive the Fear & Greed Index as signaling Extreme Greed during this phase.

Phase 4 – Correction (crash)
Following the euphoria of the Parabolic phase, the market undergoes a major downward correction. Previous bear market periods have witnessed approximately 80% drawdowns from the peak, with negative price movements lasting for roughly a year. For instance, the most recent downturn saw Bitcoin's price plummet from an all-time high of $69,000 (November 2021) to $15,476 (November 2022).

What maximum price of Bitcoin do you expect this or next year?

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