Author: Bitcoin Magazine Pro Team
When Bitcoin prices rise, many investors get excited. But, before jumping in, it’s important to look at a few indicators to understand what’s going on. One of the most important bitcoin indicators is the Bitcoin cycle, which measures the market’s momentum and tells investors if Bitcoin is still in a bull run or if it’s time to brace for a correction. This article will help you understand the current state of the Bitcoin cycle and help you make informed investment decisions as the 2024 market trends approach.
Bitcoin Magazine Pro’s Bitcoin analysis tool will help you achieve your goals. This resource will help you understand if Bitcoin is still in a bull cycle and use this information to make informed investment decisions during the 2024 market trends.
Bitcoin shows signs of recovery after major selloffs, indicating that a market turnaround may be underway. As of October 2023, Bitcoin trades at $27,193 after climbing 12.4% in September. The recent uptick is a positive development for Bitcoin, which has battled to stay above the $26,000 mark in recent weeks. The market’s performance in September is exciting as the month historically marks price drops for Bitcoin.
Bitcoin’s price rose more than 10% in September, defying expectations. CEO Ki Young Ju noted that the uptick could signal further gains for Bitcoin as it appears to have resumed its bull cycle. “I’m sorry, bears. Based on on-chain data, Bitcoin is back to the bull market,” said Ju in a post on X, formerly Twitter. “We’re still in the middle of the bull cycle, and the growth rate difference chart says so.”
Bitcoin’s current uptrend follows a predictable historical bull and bear cycle pattern. The growth rate difference chart highlights clear trends from Bitcoin’s past bull and bear cycles, beginning with 2013-2015. In 2013, a sharp increase in market cap initiated a bull market, which was later followed by a steep correction in 2014, marking a bear market phase. This pattern repeated between 2016 and 2018, with a new bull cycle starting in 2016, peaking at the end of 2017, and then declining throughout 2018 into bear territory.
Each period of market cap growth was followed by a corresponding correction, as seen with the fluctuations between the green (bull) and red (bear) zones on Young Ju’s chart. In the 2019-2021 period, another recovery began, propelling Bitcoin to new heights in 2021. The subsequent decline in 2022, exacerbated by rising inflation and broader market corrections, brought Bitcoin back into a bear cycle. The growth rate difference shifted into the red zone, indicating a prolonged bear market phase.
Entering 2023, the chart indicates a reversal of the bearish trend as Bitcoin’s market cap begins to outpace its realized cap once again. This shift into the green zone suggests the start of another bull cycle. “Typically, these growth patterns last around two years,” Young Ju said, noting that if the current trend holds, the bull market may extend into 2025.
2024 has also departed from Bitcoin’s usual performance in September, a month historically associated with price drops. In contrast, Bitcoin has posted a rise of over 10% this September, defying expectations. Market analyst Ali Martinez noted that when Bitcoin ends September with a positive candlestick, it has often paved the way for substantial gains in the following months.
For instance, Bitcoin saw significant gains in October 2015 and 2016 following strong September performances, with increases of 33.49% and 14.71%, respectively. This year’s positive September performance could signal more gains as the market grows, particularly as Bitcoin remains in the middle of its current bull cycle.
As October rolls around, the Bitcoin community is buzzing with excitement. Historically, this has been Bitcoin’s favorite time to shine, and the buzzword ‘Uptober’ is making a comeback. But let’s rewind a bit and talk about September. It’s been a rough month for Bitcoin, with prices often taking a hit. In fact, from 2017 to 2022, every September ended in the red for Bitcoin. For years, it was consistently one of the worst-performing months for BTC.
2024 had other plans. Instead of stumbling, Bitcoin surged! For the first time in years, September ended with a 9.3% return, its best performance since Bitcoin’s inception, according to Coinglass data.
To put this in perspective, BTC only managed a 3.91% gain in September last year. As of Sep. 30, Bitcoin is trading at $64,600, having climbed about 2% in the past week. Much of this momentum comes from recent moves by the U.S. Federal Reserve.
On September 18, the Fed cut interest rates by 50 basis points, giving the market a solid boost. October has always been a standout month for Bitcoin, with an average return of 22.9%. With BTC already showing strength as we leave September behind, what could be next for Bitcoin?
As we head into October, several vital factors align for Bitcoin, setting the stage for a potentially bullish month. Let’s break them down one by one.
Bitcoin’s fourth halving event occurred in April 2024, slashing mining rewards in half from 6.25 BTC per block to 3.125 BTC. This supply reduction has often sparked bullish price movements, although not immediately. Bitcoin follows a post-halving pattern, swinging between highs and lows before building key momentum.
Interestingly, research suggests that Bitcoin’s price cycles typically start gaining traction around 170 days after a halving, peaking roughly 480 days later. With October marking about 170 days since the most recent halving, many speculate this could start a major upward movement for BTC.
What makes this even more intriguing is the fact that the final quarter of the year, especially during halving cycles, has historically been bullish. For example, in Q4 of 2012, Bitcoin surged 97.7%, Q4 of 2016 saw gains of 58.4%, and Q4 of 2020 delivered an astonishing 168.9% rally. If history is any indicator, Q4 of 2024 could follow this pattern, with October potentially setting the stage for a strong rally.
The 2024 U.S. election race is fueling Bitcoin’s fire, with both major candidates stepping into the conversation. Former President Donald Trump, once a skeptic, has made a critical pivot. In May of this year, he began accepting digital currency donations for his campaign, which immediately caught the community’s attention.
In June, Trump reinforced his pro stance by voicing support for Bitcoin miners, expressing hope that the remaining Bitcoin supply would be mined domestically. He didn’t stop there. At the end of July, Trump made headlines by attending the Bitcoin Conference in Nashville as the main guest, where he proposed creating a national strategic reserve of Bitcoin. To cap things off, on September 16, Trump launched his decentralized finance project, “World Liberty Financial,” solidifying his deepening involvement in the digital coin space.
Vice President Kamala Harris has also started courting the digital coin community, although with more caution. After a long silence, she’s finally making statements that show she’s warming up to the sector. In a recent speech in Pittsburgh, Harris highlighted the importance of maintaining U.S. dominance in blockchain technology, a critical backbone of the ecosystem.
Her campaign followed by releasing a policy document that promised to “encourage innovative technologies like AI and digital assets,” signaling a nod toward Bitcoin's importance. With both major candidates dipping their toes into the waters, Bitcoin's political landscape seems to be shaping up favorably, especially as election season heats up.
The macroeconomic environment is also key to Bitcoin’s outlook for October. Despite some mixed signals, there’s reason to remain optimistic. The U.S. economy added 142,000 jobs in August, slightly more than in July, boosting market confidence. However, job revisions from previous months suggest the labor market might not be as strong as it initially appeared.
Another critical factor, inflation, is cooling on the surface. In August, the Consumer Price Index (CPI) hit its lowest level since February 2021, landing at 2.5% on a 12-month basis, just below the expected 2.6%. Core inflation, which excludes volatile items like food and energy, remains stubbornly high, coming in at 0.3% for August, which was higher than anticipated.
On September 18, the Federal Reserve made a historic move, cutting interest rates by 50 basis points to 4.75-5%. This has injected fresh liquidity into the financial system. Meanwhile, China has taken steps to stimulate its economy on the global stage. On Sep. 27, Chinese equities surged to their best week since 2008, thanks to a stimulus package rolled out by Beijing.
The People’s Bank of China announced an 800 billion yuan ($114 billion) lending pool to support local companies and non-bank financial institutions. This influx of capital has lifted investor confidence worldwide, creating a more stable backdrop for risk assets like Bitcoin.
Everything is smooth sailing on the geopolitical front. Tensions continue to escalate in the Middle East, particularly as the Israel-Palestine conflict nears the one-year mark.
Rising friction between Israel and regional nations, including the potential threat from Iran-backed Hezbollah, could introduce uncertainty into global markets. While Bitcoin is often seen as a hedge against traditional financial volatility, any stark geopolitical event could dampen the ongoing bullish sentiment, complicating what has otherwise been a favorable setup for BTC.
As Bitcoin enters October, many experts and macro analysts are weighing in on what could unfold in the coming days. One of the main themes analysts focus on is the surge in global liquidity, a key driver for Bitcoin. Julien Bittel, Head of Macro Research at Global Macro Investor, notes that global money supply (M2) has risen again, a historically positive sign for Bitcoin.
He suggests that Bitcoin tends to react quickly to such liquidity injections, and given the current macro environment, we may be nearing what he calls a “last-chance saloon to go long before The Banana Zone kicks in.” It’s important to remember that while liquidity is bullish for Bitcoin, geopolitical tensions in the Middle East and the possibility of unexpected economic shocks, like those seen during COVID, could disrupt this momentum.
Another notable analyst, Michaël van de Poppe, has set a bullish target for Bitcoin. He predicts that by the end of 2024, Bitcoin could trade between $90,000 and $100,000. Like Bittel, van de Poppe cites the growing global liquidity as a major factor. With gold and silver prices climbing to multi-year highs, Bitcoin, often called “digital gold,” is expected to follow suit.
According to The Kobeissi Letter, U.S. consumers are becoming increasingly pessimistic about the economic outlook. Americans’ confidence in current economic conditions has fallen to its lowest level since 2020, mirroring the levels seen during the 2008 Financial Crisis. Historically, whenever the gap between consumers’ current assessment and future expectations exceeds 30 points, a recession has typically followed, with 2003 being the only exception.
At present, we’re at that critical 30+ point mark again. While Bitcoin may be gearing up for a bull run, the wider economy could be on the verge of a recession. If a recession does hit, it could have mixed implications for Bitcoin.
Bitcoin is often seen as a safe-haven asset during economic uncertainty, which could boost demand. On the other hand, a severe economic downturn might reduce investors' risk appetite, potentially limiting Bitcoin’s upside.
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Bitcoin could be entering the last stage before the final leg of its current bull run. Analysts usually point to Q4 2024 as a potential breakout for the six-month-long price range in which BTC has traded since June. If so, a bullish breakout would trigger Bitcoin's next and final price rally for this cycle. Most market cycle analysts believe BTC could top out by Q3/Q4 2025. How high can the asset go before it tops out?
Bitcoin's "power law" model suggests BTC could reach a peak of around $400,000 if historical trends play out. For context, Bitcoin has always hit the model's resistance level and topped out in previous cycles, apart from the 2021 one.
If the trend repeats, the model projected $400,000 as the likely target to watch, an outlook reinforced by analyst Ali Martinez. Even the Stock-Over-Flow (S/F) model target was close to $400,000.
Only some people are convinced that Bitcoin will top around $400,000. Stock money Lizards, another Bitcoin analyst, projected that BTC could hit a top near $200,000, $260,000 by October 2025. “We are entering what could be the final pump of this Bitcoin cycle. The cycle top is expected around September to October 2025. My personal price target for Bitcoin is between $200,000 and $260,000.”
This timeline and the October 2025 target were based on past trends, where BTC topped out 48 months after the previous peak. Interestingly, this price target was similar to that of Standard Chartered Bank. The bank projected that BTC could hit $250,000 by the end of 2025. For 2024, the bank foresaw BTC climbing above $125,000 if Trump wins the election. Stockmoney Lizards estimated $100,000 per BTC by year-end if historical patterns played out.
BTC was valued at $65,000 at press time. The macro front was increasingly becoming a key tailwind for the asset. After the U.S. Fed pivot on September 18th, China launched an aggressive economic stimulus package to revive the economy. Market pundits believe these macro updates could boost BTC’s rally.
Bitcoin follows a cyclical price movement pattern many investors look to for guidance on future price movements. In general, Bitcoin cycles consist of four distinct stages:
The first phase of the Bitcoin cycle is typically called the “accumulation phase.” This phase occurs when Bitcoin has recently experienced a large price decline, and investors are stepping in to buy the asset at a low price. During this phase, the market sentiment is typically negative, and many investors believe that Bitcoin will continue to decline.
The price has already dropped significantly, and smart money investors recognize that a bottom is forming and will soon begin to recover. Bitcoin’s price generally trades within a range during the accumulation phase, with little volatility. After some time, the price will break out of this range to the upside, signaling the cycle's next phase has begun.
The second phase of a Bitcoin cycle is the “uptrend” phase, also known as the bull market or the recovery phase. This phase occurs when the price of Bitcoin begins to rise after the accumulation phase. During the uptrend, the price of Bitcoin rises significantly, often drawing the attention of the broader market and media.
As Bitcoin’s price rises, it can create a sense of euphoria among investors, leading to more buying. The uptrend phase can last for months, and the price of Bitcoin can reach new all-time highs during this phase.
The “distribution phase” of a Bitcoin cycle occurs after the price has risen significantly and begins to consolidate. During this phase, early investors and “smart money” recognize that the uptrend is ending and begin to sell their holdings for a profit.
While Bitcoin's price can continue rising during the distribution phase, the market creates mixed signals that confuse average investors. Increasing price volatility, negative news events, and a potential rise in on-chain metrics can signal that distribution is underway.
The final phase of a Bitcoin cycle is the downtrend, or bear market phase. This phase occurs when the price of Bitcoin has recently hit a peak and begins to decline. The downtrend can last for an extended period, with the price of Bitcoin often falling over 80% in some cycles.
During the downtrend phase, market sentiment can become highly damaging, with many investors anticipating that the price will continue declining indefinitely. Smart money investors are often buying Bitcoin at this stage, as the price has dropped significantly and a bottom will form before long.
Bitcoin has a unique cycle. Driven by a unique process called halving, this cycle creates periods of both growth and volatility. Investors must understand how the halving impacts Bitcoin’s price movements over time.
Bitcoin’s halving occurs approximately every four years when the reward for mining Bitcoin is cut in half. This effectively reduces the rate at which new Bitcoins are introduced into the market, leading to a supply shock. Combined with Bitcoin's capped supply of 21 million coins, this predictable supply reduction can significantly affect price dynamics.
Bitcoin’s halving-induced supply shocks create major disruptions in Bitcoin’s price behavior. Before the halving, supply and demand are in relative equilibrium.
Demand from the settlement (approximately $40 billion per day currently) and accumulation are balanced with the existing supply stock and new issuance of Bitcoin each block. When the halving occurs, this equilibrium is disrupted, spurring renewed speculative interest and driving new cycles of price discovery.
Bitcoin’s halving-induced supply shocks set the stage for a boom-and-bust cycle that has been a recurring pattern in its history. This cycle is primarily driven by how supply scarcity interacts with speculative demand, leading to sharp price increases (the boom), overvaluation, and eventual correction (the bust) before settling into a new equilibrium.
The halving is a one-sided force that almost universally leads to upward pressure on price. It’s difficult to imagine a scenario where a reduction in supply, while demand remains steady or increases, is interpreted negatively by the market.
Existing sources of demand, such as Bitcoin’s use in settlements and accumulation by retail and institutional investors, remain unaffected. At the same time, the halving logically leads to more demand from marginal sources as investors anticipate future scarcity and speculate on higher prices.
As this supply-side pressure builds, the early stages of a boom are marked by steady price appreciation, which gains momentum as more market participants notice. Retail investors, driven by FOMO, further accelerate the price increases.
With each new price high, Bitcoin draws more attention, leading to institutional involvement and additional buying pressure. Bitcoin’s narrative as a hedge against macroeconomic uncertainty or inflation can boost its appeal at this stage, attracting even more demand.
Like all markets, Bitcoin's bull markets eventually reach a peak. Early investors begin to take profits in the later stages of the boom, and the pool of new buyers shrinks as they become fully invested. Prices can spike rapidly during this phase, driven by speculative mania and short-term exuberance.
This euphoria typically culminates in a blow-off top before the market begins to correct. As the top forms, marginal buyers disappear, and those who bought at or near the top often panic sell, accelerating the downturn. The initial drop can be swift and severe as the market adjusts from overvaluation.
Bitcoin’s bear markets have retraced in each cycle to a higher floor, leading to successively higher lows and showing progressively higher market equilibrium. This is due to the dramatic returns achieved during the bull market phase. While market tops are typically overvalued, bottoms are often undervalued, and a new equilibrium forms after prices stabilize and speculative excesses are flushed out.
The market eventually seeks a new equilibrium where price more accurately reflects underlying supply-demand fundamentals. This bust phase can last several months to a few years, as the market digests the speculative froth. Once this excess is cleared, the bitcoin market begins laying the groundwork for the next cycle. As supply-demand dynamics stabilize, new investors gradually return, setting the stage for the next halving to repeat the process.
Time preference refers to how much an individual values present consumption versus future rewards. A high-time preference favors immediate gains, while a low-time preference prioritizes long-term benefits and patience. In Bitcoin investing, having a low time preference is crucial due to the cyclical nature of its price movements, driven by halving events. Short-term volatility can be misleading, making focusing on Bitcoin’s long-term potential essential.
Investing with a low time preference is especially important in Bitcoin’s case, where price movements are inherently cyclical due to the halving events. For this reason, focusing too much on short-term price fluctuations can be misleading and stressful for investors.
A low-time preference encourages individuals to focus on the larger picture, Bitcoin’s properties, and historical trends within a deteriorating macroeconomic environment. This approach is why many experienced investors favor “dollar-cost averaging,” where purchases spread out over time, regardless of the price.
Rather than trying to time the market, these investors commit to holding Bitcoin for several years, often five or more. They are better positioned to ride out the volatility by maintaining a low time preference.
Bitcoin markets are famously volatile and experience wild boom and bust cycles. Understanding the cycles, particularly the market tops and bottoms, is critical for investors looking to profit from this volatility. Identifying past market cycles can help investors gauge the current market cycle and decide when to buy or sell Bitcoin.
Various methods have been used to develop models and tools to identify periods of overvaluation and undervaluation. These models vary in complexity and inputs, ranging from simple moving averages to momentum oscillators to on-chain spending behaviors.
Philip Swift created the Investor tool for long-term investors. It indicates periods when prices are likely approaching cyclical tops or bottoms. The tool uses two simple moving price averages for under/overvalued conditions: the 2-year MA (green) and a 5x multiple of the 2-year MA (red).
Price trading below the 2-year MA has historically generated outsized returns and signaled bear cycle lows. Conversely, price trading above the 2-year MA x5 has historically signaled bull cycle tops and a zone where investors de-risk.
Willy Woo developed the Bitcoin Top Cap model to identify market cycle tops. It is
calculated by multiplying the Average Cap by a factor of 35x. The Average Cap is calculated as the cumulative sum of daily Market Cap values divided by the age of the market in days. An additional Top Cap model considers an Average Cap 15x multiplier to show sensitivity and gauge the effect of diminishing returns.
The Pi Cycle Top, also created by Philip Swift, compares the momentum of two moving average indicators. It compares the 111 SMA and 2 * 350 SMA of Bitcoin’s Price. These two moving averages were selected as 350 / 111 = 3.153, approximating the Pi number.
When the 111 SMA meets the 2 * 350 SMA, it indicates an overheated market. The mid-timeframe momentum reference crosses above the long-timeframe momentum reference. When the 111 SMA falls beneath the 2 * 350 SMA, it indicates a deflating market that is cooling off after overheating.
The Mayer Multiple oscillator is calculated as the price-to-200-day moving average ratio. The 200-day MA is a widely recognized indicator for establishing macro bull or bear bias. The Mayer Multiple represents a measure of distance away from this long-term average price, which can be used to gauge overbought and oversold conditions.
Following Trace Mayer's original analysis, overbought and oversold conditions have historically coincided with Mayer Multiple values of 2.4 and 0.8, respectively. These multiples are then applied to the 200 DMA to establish cycle top and bottom pricing models.
It is a well-known indicator often associated with bullish (price above) and bearish (price below) markets. Values below 0.8 represent prices trading at a 20% discount to the 200-day MA.
Bitcoin has traded at Mayer multiple values below 0.8 for approximately 20% of its trading history. Values above 2.4 represent prices trading at a premium of 240% times the 200-day MA. Bitcoin has traded at Mayer Multiple values above 2.4 for approximately 10% of its trading history.
Hash Ribbons track phases of the mining market boom and bust cycles. During expansion, the 30 DMA of hash rate will rise faster than the 60 D, while during capitulation, it will fall below, signifying a loss of hash rate online.
During bull markets, the hash rate will expand as miners invest in more mining hardware. This causes the 30 DMA of hash rate to rise faster than the 60 D. During bear markets, when miner incomes are stressed, some miners must turn off non-profitable rigs. This can lead to miner capitulation, creating a Hash Ribbon inversion, where the 30 D falls below the 60 D.
Bitcoin Magazine Pro offers comprehensive analytics tools to help investors and enthusiasts better understand Bitcoin through data. The platform provides a wide range of free, regularly updated Bitcoin charts, each accompanied by detailed explanations to make complex information accessible.
For those looking to go deeper, paid tiers offer features like:
Whether you're a curious Bitcoin investor wanting to grasp the factors influencing Bitcoin's price or an analyst eager to expand your knowledge, Bitcoin Magazine Pro aims to provide clarity and insights to support more informed decision-making in the Bitcoin space.
Save 30% on Bitcoin Magazine Pro's Bitcoin analysis tool today when you sign up on our annual plan!
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