The Bitcoin (BTC) price has followed a four-year cycle with consecutive bullish and bearish trends at measurable intervals. A closer look at Bitcoin’s long-term price action reveals that the race to the top and the bottom of previous cycles are very similar. What is more interesting is that the cycle from 2020 to 2021 shows signs of following the same pattern.
Independent market analyst, HornHarris, discovered that the period between the minimum and the maximum has been the same since 2015, 152 weeks and 52 weeks, respectively.
Even in 2013, the bear market lasted 58 weeks, only six weeks apart from the other two cycles.
Another resemblance 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. Bitcoin price gained almost 350% from the low of $3,125 and did not fall below this level thereafter, marking the bottom of the previous cycle.
Four years later, the conditions have changed, but the underlying reason for the latest 30% rise in the price of Bitcoin was still that the market expected lower prices due to macroeconomic headwinds. The lack of positive sentiment and the accumulation of short positions in the futures market may have allowed buyers to mount a rally of disbelief to hunt short-term selloffs and incite FOMO among investors who had stayed on the sidelines.
But not all conditions are equal. Previously, BTC whales, addresses holding more than 1,000 BTC, went buying when the price of Bitcoin started bottoming out. However, these buyers have not participated in the recent rally, raising questions about its sustainability.
If history repeats itself, Bitcoin’s November 2022 lows 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 record a new high in October 2025.
It will be interesting to see if the whales buy into the theory that the Federal Reserve under Jerome Powell achieves a soft landing instead of a recession as a result of its war on inflation. December economic data on consumer price inflation and employment figures showed the first signs of macroeconomic improvement. A few other on-chain indicators could help confirm if this bull run is the real deal.
Short-term bullish reversal signals appear
Bitcoin has been trading around cheap buying levels for quite some time on the longer time frames. In the short term, however, the risk of the price falling to new lows was high due to selling pressure from miners, macroeconomic headwinds, and fears of FTX contagion. The recent rally shows signs that on-chain signals are moving into bullish territory.
The Bitcoin Realized Price metric reflects the average price of buyers moving coins within the network. Its price fell below its Realized Price only three times in the past eight years. Furthermore, a break above this level has marked the end of the downtrend in each of them.
Currently, the Realized Price of Bitcoin stands at USD 19,715. If the price sustains above this level, it will encourage buyers on the sidelines to join the rally.
The indicator is used to identify bullish and bearish trends. When the price is in an uptrend, investors extend their winning positions during pullbacks, which is indicated when the value of the SOPR indicator stays above one. In a downtrend the opposite is true: sellers dominate the market by selling rallies. Therefore, a metric crossing above the pivot by one is a strong trend reversal signal.
So far, the 7-day MA trades are still losing, but the price is very close to a bullish turnaround. Based on the latest retracement to the SOPR pivot, the move higher will come after a successful weekly close above $21,200.
Another reliable short-term on-chain indicator is the Spend Output Profit Ratio (SOPR). It measures the profitability of Bitcoin transactions based on the price of tokens when they are added to and removed from specific addresses.
Another notable development has occurred with Bitcoin miners, who were one of the most significant sellers in 2022, as the market price fell below Bitcoin’s cost of production, putting pressure on them. However, the days of capitulation by the miners are probably long gone.
The Hash Ribbon indicator developed by an on-chain analyst, Charles Edwards, issued a buy signal, which suggests the end of the downward trend in hashrates, with a recovery in prices above the production costs of large and medium-sized companies.
Unless the price of Bitcoin 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 their operating costs.
The strong similarities between previous Bitcoin cycles and the relief of the current mining sell-off should help buyers build a bullish support level for the long term.
However, the lack of buying and the price pullback from the SOPR pivot level around $21,200 raise alarm bells that sellers may start to dominate again. The on-chain support level for buyers is around the Realized Price at $19,715.
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