The price of Bitcoin (BTC) has followed a four-year cycle, with successive bull and bear trends occurring at somewhat measurable intervals. A closer look at Bitcoin’s long-term price action shows that the run-up to the top and bottom of the previous cycles are remarkably similar. What is more interesting is that the 2020-2021 cycle shows signs of following the same pattern.
Independent market analyst HornHarris found it that the period between the bottom-to-top and the top-to-bottom has been the same since 2015: 152 weeks and 52 weeks respectively.
Even in 2013, the bear market lasted 58 weeks, just six weeks apart from the other two cycles.
Another similarity to the latest bottom formation is the similarity between Bitcoin’s current uptrend and that of 2019, when the main catalyst was prevailing negative investor sentiment. The price of Bitcoin rose nearly 350% from the bottom of USD 3,125, and failed to sink past this level, which marked the bottom of the previous cycle.
Four years later, circumstances have changed, but the underlying reason for Bitcoin’s latest 30% price increase was still that the market expected lower prices due to macroeconomic headwinds. The lack of positive sentiment and the build-up of short positions in the futures market may have allowed buyers to stage a disbelief rally to chase short order liquidations and fuel FOMO – fear of missing out – among investors who had been sitting on the sidelines.
But not all conditions are the same. Previously, BTC whales – addresses with more than 1,000 BTC – went on a bargain hunt as Bitcoin’s price started to fall. However, these buyers have not 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 reach a new peak in October 2025.
It will be interesting to see whether whale buyers believe the Federal Reserve’s theory under Jerome Powell that it is making a successful soft landing rather than a recession as a result of its flight from inflation. December economic data on consumer price inflation and employment data showed early signs of macroeconomic improvement. A few other on-chain indicators can help confirm if this bull run is real.
Bullish reversal signs appear in the near term
Bitcoin has been trading around longer-term bargains for quite some time now. In the short term, however, the risk of a price drop to new lows was high due to miner selling pressure, macroeconomic headwinds and FTX contagion fears. The recent rally shows signs of on-chain signals moving into bullish territory.
Bitcoin’s realized price metric reflects buyers’ average price as they move the coins on-chain. The price fell below the realized price only three times in the past eight years. Moreover, a break above this level marked the end of the bearish trend in all of them.
Currently, Bitcoin’s realized price is $19,715. If the price stays above this level, it will encourage sidelined buyers to join the rally.
Another reliable short-term indicator on the supply chain is the Spend Output Profit Ratio (SOPR). It measures the profitability of Bitcoin transactions based on the price of tokens as they are added and removed from specific addresses.
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, signaled when the value of the SOPR indicator remains above one. The reverse happens with a bear: bears dominate the market by selling during rallies. Thus, a crossover of the metric above the pivot at one is a powerful trend reversal signal.
So far, the seven-day average trades are still trading at a loss, but the price is close to bullish. Based on the latest retest of SOPR’s pivot, the bullish reversal will take place after a successful weekly close above USD 21,200.
Another notable development occurred with Bitcoin miners, who were one of the main sellers in 2022 as the market price dropped below Bitcoin’s cost of production, putting pressure on them. However, the days of miner capitulation are probably behind us.
The Hash Ribbon indicator, developed by on-chain analyst Charles Edwards, flashed a buy signal, suggesting that the trend of falling hash rates is coming to an end, with prices recovering above the cost of production of large to mid-sized companies.
Unless the Bitcoin price falls below $20,000 in the near future, the market can expect miners to start accumulating Bitcoin instead of having to sell the entire amount to cover operational costs.
The strong similarities between Bitcoin’s previous cycles and a relief from the ongoing miner sell-off should help buyers build a long-term bullish support level.
However, the lack of whale purchases and the price reversal from the SOPR pivot level around $21,200 raises a few alarms that the sellers may begin to dominate again. The on-chain support level for buyers is around the realized price at $19,715.
The views, thoughts and opinions expressed here are those of the authors only and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain any investment advice or recommendations. Every investment and trading move involves risk and readers should do their own research when making a decision.