Bitcoin markets are cyclical, with previous cycles centered on halving events. If history repeats itself, the Bitcoin cycle may be nearing its end.
A number of on-chain indicators point to Bitcoin being at or near the bottom of its cycle. The most significant is the impact of the halving event, as it has been in previous cycles.
The Bitcoin halving algorithm automatically reduces the block reward by half every four years. The next one is scheduled for May 2024, when the block reward will be reduced to 3.125 BTC.
According to analysts, Bitcoin has historically bottomed 517-547 days before the next halving event. The halving counter indicates that it is only 495 days away. If history repeats itself, markets could be very close to their cycle bottom.
Other technical indicators are displaying cycle bottom signals as well. According to ‘PlanB,’ the creator of the stock-to-flow model, the Bitcoin Relative Strength Index (RSI) is at its lowest point in history.
The RSI is a momentum indicator that measures the speed and magnitude of recent price changes in an asset. Furthermore, it is used to assess overvalued or undervalued market conditions, which are currently extremely weak.
“It’s actually a prolonged, boring, sideways crab market where alts slowly bleed vs BTC and volume dries up,” said crypto analyst Miles Deutscher of a Bitcoin wick down to $10,000. That’s how real pain looks.”
Since the FTX collapse in early November, markets have been sideways. Indicators suggest that consolidation will continue well into 2023.
On the plus side, retail investors and long-term holders are still very bullish. According to Glassnode’s lead analyst, the total supply held by long-term holders is at an all-time high.
Bitcoin prices have been flat since a week ago, when they were just below $17,000. According to CoinGecko, there has been almost no movement in the past 24 hours, and the asset was changing hands for $16,829 at the time of press.
BTC prices have not yet returned to their November 22 cycle low of around $15,700, but they are close. Bitcoin is currently down 75.6% from its all-time high set in November 2021.
Furthermore, previous bear cycles saw drawdowns of more than 80%, suggesting that there may be some more pain ahead.