If we distribute the change in the Bitcoin exchange rate over the past years by month, then we will not see any obvious dependencies. At least there will be no such correlations that could be used in trading.
But if you divide the rate change chart into periods between halvings, then the cycles will become quite obvious and similar to each other. Calm after halving, sharp growth in the first half of the cycle, bottom in the second half of the cycle, and halving again.
Bitcoin cycle chart
(click on graph to enlarge)
You can also look at it in logarithmic form to better see the structure of the early cycles:
Rates here and below were taken from the Kraken exchange (at the maximum of daily trading).
Why can halvings affect the rate?
Halving is a halving of the emission reward to miners, which occurs approximately every four years.. If before April miners received 6.25 BTC per found block, then after halving they will begin to receive 3.125 BTC. With an average of six blocks per hour, Bitcoin emission will decrease from 900 BTC to 450 BTC per day. Fewer new bitcoins will enter circulation and onto exchanges, which, while demand continues, should increase the price. But this event is known in advance and is included in the trading price, so no sharp jump occurs at the moments of halving. However, halving remains a very important factor influencing the Bitcoin economy.
Past Bitcoin halvings
On the halving table we see that in each subsequent cycle at the time of halving, the Bitcoin rate significantly exceeded the previous value. The second was 54 times larger than the first, the third was 13 times larger than the second, and the current rate, at the time of writing this material, is eight times higher than the rate of the last halving.
Cycle comparison chart
If you superimpose the graphs of the last three cycles on top of each other, some dependencies will become even more visible. They are also called “cryptosummer” (when everything grows) and “cryptowinter” (when everything falls). It’s worth making a reservation: the graphs are normalized by height so that the scale does not interfere with comparison, and the peaks are taken in the first half of the graph, and the minimum values in the second. Although in fact, the minimum values were all at the very beginning of the cycle, and in the current cycle we received the maximum value at the very end.
Why was this done? From a trading point of view, we are interested in when to buy, when to sell, and also the repeatability of observations. The low at the beginning of the cycle was still always higher than the bottom of the previous cycle, so the optimal strategy was to buy at the bottom of the last cycle and sell at the high of the next.
Also, each cycle had features that distinguished it from others. In the current cycle, we got the maximum values at the very end, before the halving, in the previous cycle there were two peaks, the previous cycle was shorter than the others by almost three months. It is clear that explanations can be found for everything: here is the approval of Bitcoin ETFs in the current year, and the pouring of Covid money in the past, and the mining boom in the year before.. There are always some events in the world that affect the course and make adjustments.
If we accept the conditions described above for minimums and maximums, we get the following picture:
Start of cycle End of cycle Max. price* Min. price* Cycle 1 11/28/2012 07/09/2016 11/27/2013 01/13/2015 Cycle 2 07/09/2016 05/11/2020 12/17/2017 12/15/2018 Cycle 3 05/11/2020 ≈ 20.04 .2024 11/10/2021 11/22/2022
And you can quantify the most important indicators:
Cycle 1 Cycle 2 Cycle 3 Max. price $1133.95 $19660 $68991 Min. price $210.21 $3225 $16277.6 Starting price $12.66 $663 $9175 Ending price $663 $9175 — Days from halving to high 364,526,548 Days from halving to low 776,889,925 Days from high to low 412,363,377% increase from halving to maximum 8857% 2865.3% 651.9% % rise from halving to low 1560.4% 386.4% 77.4% % fall from high to low 81.5% 83.6% 76.4%
Among the recurring features, it is worth noting: after the halving and before the pump, there have never been significant drops in the rate.
Many people find the structure of the Bitcoin cycle very similar to a regular market cycle:
And if this cycle is superimposed on the logarithmic view of the Bitcoin exchange rate, then a picture is obtained that is called the Bitcoin Rainbow Chart or Bitcoin Rainbow Chart:
There are several views of this chart on different sites, but they all show that we are now at the bottom or middle of the cycle. Well, ahead is a rate of a million dollars or more per coin, the only difference is when. According to some schedules, in a couple of years, according to others, in six to ten.
Bitcoin optimists believe that since we are just entering a new cycle, there are still big X's ahead, an influx of new institutional money after the approval of Bitcoin spot ETFs, a new round of spinning the fear of missing out (FOMO) and a bull run to new heights.
Bitcoin pessimists believe that there will be no new cycle in the usual sense, there will only be a decline with rebounds, because manipulators specifically drive people into purchases, unloading on them the volumes that were previously purchased at the bottom. And the rainbow is drawn incorrectly, the right end will go down.
Can we say that we are now close to the upper peak of the rate?
The statement cannot be guaranteed to be confirmed or refuted, but there are additional metrics that you can rely on. For example, the top peaks of past cycles had clear peaks of interest according to Google Trends. Currently, such a peak has not yet been observed, although interest is clearly growing:
What can be predicted from the identified trends? It’s worth making a reservation right away: past events do not at all guarantee that exactly the same trends will continue in the future.. And only with this thought – we begin to extrapolate.
The percentage of growth from the halving to the maximum in the cycle decreased each time on average by three to four times; if this trend continues, then in the next cycle we would expect an increase of about 186% of the rate values at the halving.
For example, if we take the rate at $67,000 at the time of halving, with this calculation we would get approximately $124,000 at the peak. From the halving to the low in the second half of the cycle, on average, growth tends to drop by a factor of four to five, meaning growth of 17% can be expected.. For the same value of $67,000 at halving it is $78,000. The share of the fall from maximum to minimum is around 63%. For comparison, the average for previous cycles was = 80%. And between the maximum and minimum, an average of 384 days passed, that is, a little more than a year.
On the other hand, if we take the numerical series of changes in the value of Bitcoin at the time of halving, then at the current halving we should see a cost of about $33,000 per Bitcoin, and now this value is twice as high. As in other cycles, events occurred in this one that clearly greatly influenced the course. The most significant seems to be the approval of spot Bitcoin ETFs and the influx of new institutional money. Taking this factor into account, many experts predict the upper peak to be above $200,000.
However, it is worth considering: unplanned events can also be a negative. For example, a recent drop of 10% during Iran’s attack on Israel showed that as the conflict worsens, investors may close risky positions and withdraw funds from cryptocurrencies. But we cannot predict how events will develop in military terms.
There are also risks that the collapse of major industry players could cripple the market. As an example, one can imagine the fall of Tether, the issuer of the USDT token.. Or legal risks: for example, that the US Securities and Exchange Commission (SEC) recognizes all cryptocurrencies based on PoS consensus as unregistered securities. This is exactly the decision officials can make based on the Howey test when analyzing staking algorithms. Or the same ETF holders, when the crypto winter comes, will begin to put much more selling pressure on the order book than would be the case without them.
So all the calculations above should be taken solely as a thought experiment: what would happen if all the trends of past cycles were transferred to the next one, without the strong influence of external factors. Moreover, some parameters can be calculated differently, and there will be different results. And there is no point in extrapolating some parameters at all.