Research by Ignas of DeFi Research and Kevin Kelly, a noted financial analyst, has highlighted the predictability of cryptocurrency market cycles. They argue that the crypto market is surprisingly consistent with its cyclical patterns. Key insights reveal:
An approximately 80% drop from all-time highs (ATH) occurs, followed by a recovery period that spans roughly two years to achieve its previous highs. After this, a year-long price rally ensues before achieving a new ATH.
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Macro Indicators Signal Upcoming Bull Run
Kelly underscores the close relationship between Bitcoin (BTC) price peaks and the Institute for Supply Management’s (ISM) business cycle indicators. Network activity levels, such as active addresses, transaction volumes, and transaction fees, peak alongside ISM’s indices. Furthermore, Bitcoin’s year-over-year percentage changes tend to show reversals near bottoms in the ISM’s year-over-year metrics.
Moreover, while the external world may perceive crypto markets as volatile and unpredictable, Kelly emphasizes their cyclical nature. He notes that Bitcoin’s cycles have consistently followed economic business cycles, with peaks and troughs aligning closely.
ISM and Crypto’s Interconnectedness
Interestingly, every cyclical change in the ISM has correlated closely with a change in Bitcoin’s price trajectory. Kelly points out that Bitcoin price peaks typically align with signs of the ISM topping out, with other network activities following suit. As the business cycle shows hints of recovery, so does crypto network activity.
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Show more +Both Ignas and Kelly concur that the Bitcoin halving event set for 2024 could be a significant factor in the predicted bull market. Historically, halvings have aligned with major liquidity trends. The forthcoming halving could reinforce the connection between global liquidity and the crypto realm. Kelly’s analysis suggests that if Bitcoin follows its previous cyclical patterns, we could witness a new ATH by the fourth quarter of 2024.
Bullish Amidst Global Challenges
2022 was not an easy year for crypto, with numerous challenges arising from wars, changes in the FED’s liquidity cycle, and government crackdowns. However, the scene is shifting. The U.S. seemingly adopts a softer stance towards crypto, acknowledging the economic potential and being influenced by China’s ambiguous attitude.
During the anticipated bull market, crypto-specific stories are expected to gain traction. The intersection of AI and crypto, the emergence of new use cases for BTC like BRC-20s and Bitcoin’s DeFi integration, and EIP-4844 for L2 narrative are all expected to influence the market’s direction.
While the longer-term outlook for crypto appears positive, the market can still face short-term corrections. However, analyses by experts like Ignas and Kelly suggest that the crypto sphere might be on the verge of its next bull run, closely tied to bigger macroeconomic cycles. Only time will tell whether these predictions hold, but the signs seem promising.
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