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BITCOIN Convergence/Divergence of cycles shows we are on track?

INDEX:BTCUSD   Bitcoin / U.S. Dollar
On this study I will look into one of my all time favorites, the comparison of Bitcoin's cycles and how they way they converge or diverge from each other can give a meaningful interpretation of current movements and a projection of future price action. In particular my focus will be on the current Cycle (the 4th historically that started on December 2017, displayed by the orange pattern) and how it compares with Cycle 3 (November 2013 - December 2017, displayed by the blue pattern).

** Similar previous studies **
This is not the first time I compare the two using the Convergence - Divergence model. My initial publication here (have done even older ones on reddit) was the following on May 2019, that projected BTC's correction during Q3-Q4 2019:


After that the model showed on November 2019 how the $6000 level was a good buy opportunity (and would have been the bottom if it weren't for the March 2020 COVID flash crash):


On April 30 2020 it showed again a potential divergence:


While my most recent one on March 2021, which was centered around the Cycles' halvings, showed why they two Cycles would converge again soon (which eventually happened).


** What happened now? **
From a technical cyclical perspective and only on the longer time-frames, what happened now was exactly what the Convergence - Divergence model suggested, i.e. after a prolonged period of time where the two Cycles (Cycle 3 and Cycle 4) diverged (from late November 2020 to April 2021), they eventually converged and during the crash of the past 2 weeks, they have started to diverge again. This time, it is Cycle 4 (i.e. the current one) that has corrected its aggressive 6 month parabolic rally and is diverging below Cycle 3.


** Is this divergence dangerous **
The obvious answer based on the model is that this divergence is natural and by all means not dangerous to long-term investors. In fact it is perfectly aligned with the Theory of Lengthening Cycles and Diminishing Returns that I have analyzed here on multiple occasions. That Theory suggests that every Cycle is longer in duration than the previous one and its peak is logarithmically lower as BTC offers diminishing returns on its quest to greater adoption by the market/ society.

To be fair, that shouldn't be regarded as a 'theory' anymore, as practically it has been correct for each of the previous three Cycles. As you see on the chart, Cycle 2 (June 2011 - November 2013, displayed by the yellow pattern) was longer than Cycle 1 (July 2010 - June 2011, displayed by the red pattern) and Cycle 3 was longer than Cycle 2, all of which made peaks lower (as of the same scale) than the peaks of their respective previous Cycles.


** What does this model mean for us now? Fear kicked in **
That means that for some time the current Cycle should continue to diverge from Cycle 3 and take longer until it makes its peak, lower than Cycle 3. Whether that will be on the upper light-blue line, the red line or the lower light-blue line (it should in theory), that's debatable.

One thing is for certain right now as the chart below shows us, and that is that fear has kicked in once again:


As you see on this chart, every time fear has kicked in (i.e. Cycle 4 diverged below Cycle 3), that proved to be a great Buy Opportunity. On the other hand, during maximum greed (Cycle 4 diverging above Cycle 3), the price corrected.

What do you think? With fear having spread across the market and the price diverging from the previous Cycle is this a good time to buy? Is Bitcoin right on track or this is the start of a new Bear Cycle? If the theory is correct, does it mean that we will now experience the lengthening of the new Cycle?




Feel free to share your work and let me know in the comments section!

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