Before getting into the main content, a few notes:
I am a very short time frame trader, so for me, cycle analysis does not have much meaning in my trading. I tend to trade actively in the second half of a cycle, when the liquidity and range of the market is high.
But don't think I'm going to predict that phase to participate, I just react and become active when the market enters this zone. I don't know and have no need to know how the market will move.
However, what I say below is true, simply because it is common logic for any over-the-counter market with sufficient liquidity. Yet, as I read from many Crypto KOLs, they completely do not understand these things, although it is nothing profound.
Bitcoin was born in late 2008 as a protest against the Wall Street bailout. The community was small at the time. It has gone through 4 cycles so far and is in its 5th. The cycles have little correlation with the 4-year halving schedule. The linear supply squeeze can support prices in the long term, but it does not determine the timing or timing of the cycle. So the first thing you need to enlighten yourself on is not to pay attention to the 4-year timeline, but to understand the general principles of all highly liquid, freely traded assets. Those principles are:
Low liquidity, small capitalization, high amplitude go together. High amplitude means high ROI of the cycle, short cycle duration.
Conversely, higher liquidity and capitalization are associated with narrower margins. Narrow margins mean lower ROI for the cycle and longer cycle duration.
Specifically in the case of Bitcoin. The cycles play out specifically as follows:
In 2011-2012, bitcoin began to be listed for trading although liquidity was still low.
Cycle#1bottom on 11/20/2011, 1BTC = 2USD. Cycle top on 04/10/2012, 1BTC = 260USD. Time 5 months, ROI = x130 times. Drawdown after that = -82%.
Cycle#2bottom on 04/12/2013, 1BTC = 45USD. Cycle top on 11/30/2013, 1 BTC = 1163USD. Time 7 months, ROI = x26 times. Drawdown after that = -87%.
Cycle#3bottom on 14/01/2015, 1BTC = 152USD. Cycle top on 17/12/2017. 1 BTC = 19666USD. Time 36 months, ROI = x129 times. Drawdown after that = -84%.
Cycle#4bottom on 15/12/2018, 1BTC = 3122USD. Cycle top on 10/11/2021, 1BTC = 69000USD. Time 35 months, ROI = x22 times. Drawdown after that = -78%.
Cycle#5bottom on 11/21/2022, 1BTC = 15479USD. And it's still going onâŠ
You can see that Bitcoin's liquidity and capitalization increase over each cycle. So in the second cycle, compared to the first cycle, it took the same amount of time (a little longer) to reach the top, so the ROI is lower. In the third cycle, its ROI is the same as the first cycle and much higher than the second cycle, so it took 36 months (compared to 5 months, 7 months in the previous 2 cycles). In the fourth cycle, the time from bottom to top of the cycle is the same as the third cycle, so the ROI it generates is much lower (x22 times compared to x129 times).
You see, the principle I mentioned above is correct. And it is not at all profound. In investment and speculation, it is just first grade math, 1+1=2.
Based on the newly acquired knowledge, you can have some correct inferences (better than those messy Kols) about this cycle as follows:
Pretty sure the bottom will be made on 11/21/2022, as the drawdown is around the average -80% of previous cycles despite the very high liquidity (!).
If the cycle peak is created at the end of 2025 (ie the time from bottom to top is about 36 months like the previous 2 cycles), the ROI will be 22 times lower from the bottom. That means you will have a peak that is quite certain to be much lower than the 340kUSD mark (22x15k). Don't dream of 1 million USD.
However, if this cycle lasts much longer than cycles 3 and 4, the way cycles 3 and 4 lasted much longer than cycles 1 and 2, we can expect a higher ROI, possibly comparable to cycle 4. This is also the scenario I hope will happen, as it will create a long-term uptrend for many years and create many opportunities for those who persist in the market.
Good luck!
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