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While day-to-day fluctuations in Bitcoin’s price may be completely unpredictable, longer term trends display patterns.
The clearest such pattern is the four year Bitcoin cycle.
In this article we’ll show you this pattern and briefly discuss the implications.
The cycles
The plot below shows the current cycle “price ratio” alongside the prior two cycles.
The price ratio here is the price on the given day divided by the prior all time high (ATH).
The horizontal axis represents the days elapsed since the prior ATH.
The plot shows that, about a year (370 days) after the ATH, the price ratio bottoms out around 0.2—an 80% price drop.
A couple years after that, the price reaches the ATH from the prior cycle.
After that, the price increases substantially to multiples of the prior ATH.
The current cycle differs in that we’ve already hit a new ATH, perhaps due to spot ETF approvals in the US.
Based on prior cycles, where is Bitcoin going?
As you can see from the plot, if this cycle behavior repeats, Bitcoin could surpass $150k in 2025.
We are about 2.5 years into this cycle, so we’d expect to reach a new ATH within about 1.5 years (4 years total).
All past cycles exceeded 3x the prior cycle high, which would be $180k for this cycle.
However, this multiple has decreased with each cycle, and hence it may be less than 3x for this cycle.
However, for the next 100 days, we wouldn’t expect a major price increase.
In prior cycles, these next 100 days, while volatile, have not resulted in substantial long-term ups or downs.
Are halvings the cause of these cycles?
Bitcoin “halvings” have occurred roughly every four years, like these cycles.
It’s unclear if this is a major cause of the cycles, but it likely contributes.
Some Bitcoin miners sell a portion of the coins they mine.
After a halving occurs, they earn fewer Bitcoins and hence have less to sell.
As with any market, less supply generally boosts price.
Indeed, in each cycle, the price begins its major ascent about 100 days after the halving.
Warning
These type of multi-year cycles have occurred with other assets, but they don’t last forever.
There were three and a half such cycles before the DOTCOM bubble burst in 2000.
So...these cycles repeat until they don’t!
We'd be remiss not to provide another warning. It's very possible that Bitcoin's price is manipulated.
There are numerous examples of this in Bitcoin's history.
Although it seems less so today, there are still suspicious trading patterns.
So-called whale's, who own a large supply of Bitcoin,
can execute large trades to move the price up/down and give the appearance of a pattern.
They do this to fuel their growth—luring in buyers at high prices and enticing them to sell at lower
prices.
My take
There's a good chance Bitcoin could surpass $100k in the next year or so.
That's more appreciation than I expect from other assets I’m watching.
However, I also believe it’s possible, though less likely, that the last high could be the all-time high.
As such, I had about 5% of my portfolio in Bitcoin late in 2023 and, given the dramatic price increase, it’s now much more than 5%.
I probably won’t let it get to 10%—if it nears 10% of my portfolio I will begin selling to keep my allocation well below 10%.
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