An Analysis of Macro-Scale Bitcoin Cycles

2021년 4월 15일

To date, Bitcoin has followed a repeating cyclic pattern that appears to be directly driven by the mining rate Halvenings. It is useful to take a hard look at what previous cycles were like, in order to capitalize on the bull market happening today.

An enormous amount of profit stands to be made by the investor who succeeds in selling a significant share of his or her portfolio as close to the theoretical top of the bull market as possible, followed by a buyback as close to the theoretical bottom of the inevitable bear market as possible. This equity could then be traded at safe prices in the accumulation phase to stack even more profits in preparation for the following bubble.

There are several indicators to help gauge how healthy the bull cycle is, such as how much coins are being offloaded from exchanges, the relative unrealized profit/loss, and my favorite, the stock-to-flow model. This chart is an analysis of purely the naked price action on a logarithmic scale, and what characteristics can be seen from it.

The important takeaways:

• None of the previous bull cycles have lasted more than 300 days
  
  
• The percentage increase of each bull market from the previous ATH is decreasing in magnitude each time around. If the bull market follows the same pattern as 2017, then we would expect to top out no more than half the percentage of the 2017 bubble's size. This is due to the ever increasing enormity of Bitcoin's market cap, making it more difficult for prices to rise quickly. One way to mitigate the reduction in percentage gains is to have a portion of your portfolio in top ten altcoins as they will accrete much faster due to the smaller market caps. This obviously has the trade off of increased risk but could be a helpful move for new cryptocurrency investors with low starting capital.
  
  
• Bitcoin bull cycles tend to rise much faster near the end of the cycle. This makes sense if you think about it. The faster the price rises, the more incentive there is for holders to sell more than they are buying. Once a certain threshold is arrived at, the top is put in.
  
  
• A time based selling strategy appears to be a more effective approach than a price based selling strategy. It should absolutely be possible to catch a decent portion of the stratospheric 'finale' of a bitcoin bull cycle by gradually selling away your portfolio as the bull cycle ages. I personally will not start selling until the bubble is at least 240 days old.
  
  
• We are very likely not even half of the way through the current bull cycle. There is absolutely no reason for the pattern to change to shorter bull markets. In fact, the contrarians to this view of Bitcoin's macro picture overwhelmingly support the idea of longer bull markets -- a so called 'super-cycle'. This idea has some merit, making it important to not sell all of your holdings away in the coming months. I have seen no such talk of the opposite happening. Selling heavily now, at 126 days in, will probably cost a fortune in the long run.
  

Thank you for reading, I hope this write-up proves of some use to you.