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Bitcoin: Halving Cycle Resumes, Backed By Fundamental Catalysts (BTC-USD)

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Half the narration of Bitcoin and the possibility of reopening the Bitcoin bear market

In front of us coverage Why Bitcoin (BTC-USD) Bull Run must be completed by May 2021. The first thing to consider is the critical resistance level that Bitcoin has not experienced in the last decade. Note that the recent drawdown of Bitcoin began shortly after Bitcoin bounced off the 10-year resistance level in Figure 1.

The second point to consider is the three phases of the Bitcoin halving cycle. The Bitcoin halving cycle consists of a one-year bull market followed by a one-year bear market and a two-year recovery period. These three phases are shown in Figure 1. A closer look at the Bitcoin bear market also reveals a distinct set of five events that will follow before Bitcoin bottoms out and transitions to a recovery period.

Bitcoin’s last two bear markets (Figures 2 and 3) have shown that the five series of events in the bear market for the year are:

  1. Inversion pattern
  2. 50% decrease from peak
  3. Rebound from peak to 20%
  4. Another drop from peak to 70%
  5. Bottom out at 85% from peak

Bitcoin half cycle sequence of events

Figure 1: Critical support resistance leading the Bitcoin cycle.

Author, TradingView

52014 A series of events in the Bitcoin bear market

Figure 2: Bitcoin’s Five Series of Events at the Bear Market in 2014

Author, TradingView

A series of events during the 2018 Bitcoin crash

Figure 3: Five series of events in Bitcoin’s 2018 bear market

Author, TradingView

Therefore, Bitcoin is expected to be in the bare market from May 2021 based on its half cycle. Looking at Figure 4, we can see that Bitcoin has tracked the first three of the five event sequences. First, Bitcoin flashed the population inversion pattern (Head & Shoulders or Wyckoff distribution pattern), then decreased by 50% and then rebounded 20% away from the April peak. By that time, Bitcoin was to continue its fourth series of events, dropping from its April peak to 70% or $ 20,000.However, this sequence of events was temporarily interrupted by a sudden and sudden turmoil. Release NYSE Bitcoin Futures ETF (NYSEARCA:BITO)., Bitcoin hit a record high.

Bitcoin sequence

Figure 4: Bitcoin bear market sequence before sudden turmoil

Author, TradingView

However, this temporary bullishness was not enough for Bitcoin to break the resistance 10 years ago in Figure 1. After five weeks of struggle, Bitcoin quickly resumed its bearish move with a 50% drop in nine weeks. To make matters worse, Bitcoin’s weekly charts are now printed with a large Head & Shoulders pattern (Figure 4.2). Based on the distance between the head and neckline, the bearish pattern suggests that Bitcoin could fall rapidly to a price level of $ 15,000.

Bitcoin Weekly Chart Giant Head and Shoulder Pattern

Figure 4.1 Giant head and shoulder pattern on the Bitcoin Weekly Chart

Author, TradingView

There is also evidence to suggest that the current decline of Bitcoin is caused by basic catalysts, not just technical catalysts. Therefore, there is reason to believe that Bitcoin’s half-cycle remains the same, despite much higher institutional participation than the last two cycles.

The basic catalyst for the Bitcoin bear market

Simply put, Bitcoin’s current meltdown is the result of a stock market meltdown. This event is highly correlated with the March 2020 Bitcoin meltdown due to the stock market meltdown during the start of the March 2020 COVID pandemic (Figure 5).

Figure 5: Bitcoin meltdown in line with the 2020 stock market

Data by Y Charts

So why is the stock market declining? The three catalysts are inflation, the Fed’s gradual decline, and interest rate hikes.

Inflation concerns It was the cause of the first wave of stock market sellouts in February 2021. Fed’s constant allegations That inflation was temporary, and it was constantly rising before it was hit. Ten% In November. In December 2021, the Fed finally Responded That inflation may not be temporary after all, before it leads to eight rate hikes over the next two years, and we plan to begin tapering efforts in the near future.That’s because the Fed was unexpected announcement (A month later) More stringent policies may be needed to curb inflation.

Finally, the strong labor market report January 2022, this supports the much more stringent policy story of 2022. Do not underestimate this statistic. Federal Reserve System He clearly stated that tapering and interest rate hikes would only be considered after significant progress towards full employment.

This sequence of events led to the current cascade of stock market sales, which also spilled over into the crypto market.

Federal Reserve Rate Hike Forecast

Figure 6: Federal Reserve Interest Rate Forecast

Federal Reserve Board

Attention to possession of Bitcoin mining company

Without influence, no one knows how these events will unfold. However, if half the cycle of Bitcoin is fully executed, you will see $ 10,000 Bitcoin. Even if this event is only 5% likely to occur, it still needs to be prepared as it has occurred 100% during the last two half-lives of Bitcoin.

Bitcoin miners face additional risks in addition to the risk of long-term bear markets.

First, the Bitcoin miner Bankruptcy risk.. Riot Blockchain (Riot Blockchain (Riot), Bit farm (BITF), Stronghold Digital Mining (SDIG), Core Scientific (CORZ), And hat 8 mining (Hut). The four-digit mining costs reported by these Bitcoin mining companies include only electricity and hosting costs. Therefore, looking only at these reported mining costs, these mining companies can have the false impression that they can survive the long-term Bitcoin bear market up to $ 10,000.

However, including other project costs, the total cost of the mining company was found to be in the following range. $ 25,000 Close to $ 40,000 Per Bitcoin. As of this writing, Bitcoin is already trading at $ 36,000 per BTC.This means Riot Currently, the project cost cannot be covered.

On the other hand, HUT Balance Sheet-First Thinking Priority is given to mining operations, that is, to increase Bitcoin holdings as quickly and as possible. In the third quarter of 2021, Hat grew Bitcoin by 302 BTC per month, while BITF and RIOT were 220 BTC (28% less) and 115.25 BTC (62% less) per month, respectively. .. No matter how well HUT has implemented the Balance Sheet First strategy, if Bitcoin falls below $ 27,000 per total Bitcoin mining cost per BTC, HUT is expected to lose the ability to meaningfully accumulate Bitcoin. Will be done.

Under this premise, it may be better to hold an underlying asset / commodity (bitcoin) as investors do not risk bankruptcy.

Another risk that investors face when investing in a mining company is the fluctuation of the miner’s stock price against the fluctuation of the Bitcoin price.For example, RIOT’s stock price fluctuates 1.6% Move Bitcoin in the same direction every 1%. Therefore, miners are fundamentally and technically more risky in the long-term Bitcoin bear market than Bitcoin.

Our action plan and rationale

The Bitcoin halving cycle suggests that Bitcoin is in a bear market in the short term, but it also suggests that Bitcoin could rise to at least $ 100,000 in the next Bull Run. Bitcoin can act as insurance against the US dollar, as it is backed by trust in the US government, not assets, and can be manipulated against the interests of stakeholders.Previously published a paper coverage..

In addition, guidance from top officials generally shows the bullishness of cryptocurrencies.First, high officials relief Stakeholders whose purpose is to maintain investor and consumer protection standards, anti-money laundering rules, and tax laws, rather than outlawing digital assets by US federal agencies.Second, the Federal Deposit Insurance Corporation (FDIC) Reportedly We are considering expanding our service to cover Stablecoin. USDC-USD (USDC-USD (USDC-USD) Is a gateway for more investors to access cryptocurrencies.

For all of the above reasons, Bitcoin is bullish in the long run.Since then Basically does not short undervalued assetsThe dollar cost averaging method up to the bear market is adopted, utilizing the main support areas identified by the Bitcoin halving cycle.

As shown in Figure 7, the first entry point is the support zone from $ 28,500 to $ 30,000. This level is Tesla (TSLA) And other institutional investors bought Bitcoin. It is also consistent with the 50% decline shown by the second series of events in the Bitcoin bear market.

The second entry point is at the $ 20,000 price level. This level coincides with the peak of Bitcoin’s bull market in 2017. It is also consistent with the 70% decline shown by the fourth series of events in the Bitcoin bear market.

Last but not least, the third entry point is at the $ 10,000 price level. This is probably stronger support than the previous two levels of support. This is consistent with the resistance Bitcoin generated at the start of the bull market in 2020. This is consistent with an 85% drawdown from the $ 66,000 peak, where Bitcoin bottomed out in 100% of the time during the last two half cycles. It is also consistent with 10 years of support.

Entry level to the dollar cost averaging method for Bitcoin

Figure 7: Entry level to the dollar cost averaging method for Bitcoin

Author, TradingView


We have drawn references from half the cycle of Bitcoin to help navigate the crypto market. In summary, the Bitcoin halving cycle suggests that Bitcoin has been in the bear market for a long time. The bear market was temporarily disrupted by the sudden bullishness of the launch of the NYSE Bitcoin futures ETF. The stock market meltdown has prompted Bitcoin to return to the bear market.

On the other hand, the same half cycle also suggests that Bitcoin is bullish in the long run. Bitcoin is expected to reach at least $ 100,000 in the next Bull Run in 2024, just two years from now, to say the least. We also found some basic evidence to support this technical observation. Therefore, we will take this opportunity to increase our Bitcoin holdings. Specifically, the dollar cost averaging method is $ 30,000, $ 20,000, and $ 10,000, respectively.

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