Bitcoin price cycles have long been a source of curiosity for investors and analysts alike. We can gain insight into potential price movements by comparing current trends to previous cycles, especially as Bitcoin approaches the end of its consolidation period, and many are wondering if the next phase higher is just around the corner.
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To start, it is important to look How has Bitcoin performed since it hit its lows in the last cycle. As we examine the data, a clear picture begins to form: Bitcoin’s current price action (black line) shows similar patterns to previous bull cycles. Although it was a volatile adjustment period, where the price was relatively stagnant, there are key similarities when we compare this cycle to those of 2015-2018 (purple line) and 2018-2022 (blue line).
The situation we are in today, in terms of percentage gains, is comparable to both the 2018 and 2015 cycles. However, this comparison only scratches the surface. Price action alone doesn’t tell the whole story, so we need to delve deeper into investor behavior and other metrics that shape the Bitcoin market.
Investor behavior
One of the key metrics that gives us insight into investor behavior is MVRV Z-score. This ratio compares the current market price of Bitcoin to the “realized price” (or cost basis), which represents the average price at which all Bitcoins on the network were accumulated. Z-Score then standardizes the raw MVRV data to BTC volatility to exclude outliers.
Analyzing metrics like these, rather than focusing purely on price movements, will allow us to see patterns and similarities in our current cycle with previous cycles, not only in dollar movements but also in investor habits and sentiment.
Interconnected movements
To better understand how the current cycle stacks up with previous cycles, we turn to data from Bitcoin Magazine Pro, which offers in-depth insights through its API. Except for our formation cycle, where there is little correlation and isolating the price and MVRV data from Bitcoin’s lowest closing prices to its highest points in our current and previous three cycles, we can see clear correlations.
2011 to 2013 Cycle: This cycle features a double peak, showing a strong correlation of 87% with the current price action. The MVRV ratio also shows a high correlation of 82%, which means that not only is the price of Bitcoin behaving similarly, but so is the behavior of investors in terms of buying and selling.
2015 to 2017 Cycle: This cycle is actually the closest in terms of price action, featuring an 89% correlation with our current cycle. However, the MVRV ratio is slightly lower, indicating that although prices follow similar paths, investor behavior may be slightly different.
2018 to 2021 Cycle: This latest cycle, although positive, has the lowest correlation to current trends, suggesting that the market may not follow the same patterns it did just a few years ago.
Are we headed for another double peak?
The strong correlation with the 2011-2013 cycle is particularly noteworthy. During that period, Bitcoin experienced a double peak, with the price rising to all-time highs twice before entering a prolonged bear market. If Bitcoin follows this pattern, we could be on the verge of major price movements in the coming weeks. After overlaying the price action fractal from this period over our current cycle and consolidating the returns, the similarities became immediately noticeable.
In both cases, Bitcoin experienced a rapid rise to a new high, followed by a long and volatile period of consolidation. If history repeats itself, we could see prices skyrocket soon, potentially reaching around $140,000 before the end of the year when accounting for diminishing returns.
Patterns in investor behavior
Another valuable metric to examine is Value Destroyed Days (VDD). This metric weights Bitcoin movements by the amount transferred and time since it was last transferred and multiplies this value by the price to provide insight into long-term investor behavior, especially profit taking.
In the current session, the VDD has shown an initial rally similar to the red highs we saw during the double peak of 2013. This rally is where BTC reached a new all-time high earlier this year before an ongoing consolidation period saw us reach new highs soon again. Another if this double peak cycle pattern continues.
A more realistic scenario
As Bitcoin has grown and matured as an asset, we have seen extended cycles and diminishing returns in our last two cycles compared to the first two cycles. Therefore, BTC is likely to follow the cycle in which we see the strongest correlation in price action.
Figure 6: Overlay of the 2017 cycle fractal over our current price action.
If Bitcoin follows the 2015-2017 pattern, we could still see all-time highs before the end of 2024, but the rise will likely be slower and more sustained. This scenario predicts a target price of around $90,000 to $100,000 by early 2025. After that, we could see continued growth throughout the year, with a potential peak for the market in late 2025, though a peak of $1.2 million If we follow this pattern exactly it may be low. Upbeat!
conclusion
Historical data suggests that we are approaching a critical turning point. Whether we follow the explosive double peak cycle of 2011-2013 or the slower but steady rise of 2015-2017, the outlook for Bitcoin remains bullish. Monitoring key metrics like the MVRV ratio and days of value destroyed will provide more clues about which direction the market is headed, and comparing correlations to our previous cycles will give us better insights into what may be coming.
With Bitcoin poised for a breakout, whether in the next few weeks or in 2025, if BTC even remotely follows the patterns of any of our previous cycles, investors should prepare for significant price action and potential new all-time highs sooner rather than later.
For a more in-depth look at this topic, watch a recent YouTube video here: Bitcoin Rally Comparison: Which Cycle Are We Following?