Bitcoin [BTC] has traversed approximately four cycles, with each successive cycle heralding a fresh all-time high in prices.
From its early days of facilitating pizza transactions to being endorsed by multinational investment firms through spot BTC ETFs, the crypto community has experienced a remarkable journey over the past decade and beyond.
Bull runs tend to occur every three to four years, and it appears we are on the brink of another one, likely already underway. But what drives these cycles, and can they be reliably foreseen?
The straightforward response may not encompass the entirety of the truth.
Enthusiastic crypto enthusiasts might promptly assert that the Bitcoin halving cycle operates on a four-year schedule.
This cycle involves adjustments to mining difficulty and block time, resulting in halving mining rewards approximately every four years.
Understanding the four-year cycle hinges on recognizing liquidity as a crucial component.
In times of economic turmoil, acquiring investment funds becomes more challenging, leading to increased demand for safer assets. Conversely, during periods of ample liquidity, the public tends to embrace riskier asset classes, including cryptocurrencies like Bitcoin.
The Global Liquidity Index (GLI), ranging from 0-100, serves as a normalized indicator of the Global Liquidity Cycle. The COVID-19 pandemic prompted monetary policy adjustments, including debt cost reduction and quantitative easing, fueling inflation.
Measures like raising interest rates by institutions like the US Federal Reserve have aimed to counteract this inflation, although as of 2024, further rate hikes are unlikely.
A rough approximation of each Bitcoin cycle spans around 65 months, represented by a sine wave pattern. While not flawless, this model provides insights into potential peak or low points for upcoming cycles.
Is the peak of Bitcoin's cycle approaching?
The data suggests that the next cycle's peak is expected in Q4 2025, approximately around September, aligning with a previous experiment by AMBCrypto using the Bitcoin Rainbow Chart. Bitcoin took nearly three years to surge from its December 2018 low of $3.1k to its November 2021 high of $69k, and it took 1435 days to reach the 2021 high from the peak of the 2017 cycle, translating to 47.17 months, slightly shorter than the 65-month cycle index. However, recent highs and lows in the Global Liquidity Index (GLI) in 2021 and 2023 somewhat correspond to Bitcoin's MVRV ratio. Currently, the MVRV ratio has been on a year-long uptrend and is still below the cycle top value of 3.7, indicating that Bitcoin prices likely have further room to grow. Hence, the projected date of September 2025 may not precisely coincide with a Bitcoin peak either.
