Bitcoin and altcoin cycles – O T


In this post I will have deep dive into the Bitcoin and altcoin cycles. Will try to make brief points as to how I look at the cycles with a focus on data, and see how we could use that data as guide for the future. What I won’t do is go into the fundamentals of the market as I will make a separate post for this.

For simplicity and accuracy I will only look at 2014–2017 for a couple of reasons:

a. the altcoin market was tiny in 2011–2013

b. we don’t have much data about it

c. bitcoin was also tiny with most coins being lost

d. we had no price data for the first 18 months

e. the main exchange (Mt. Gox) had most of its coins stolen and faked price data (Willy bot)

Let’s start with the Bitcoin cycles first and compare this one with the one of 2013–2017:

In 2013–2015 it took 410 days from top to bottom, 575 to break the log diagonal, 592 days for the first golden cross, 698 days to break above the old support and 695 days for the second golden cross.

In 2017–2019 it took 365 days from top to bottom, 471 to break the log diagonal, 491 days to break above the old support, 501 days for the first golden cross, and probably about 793 days for the second golden cross.

From the 2013 top to the 2017 top it was 1476 days and from the 2015 to the 2018 bottom 1430.

4.04 and 3.91 years respectively.

From the 2013 top to the 2015 uptrend confirmation (retest of the breakout / key pivot) it took 698–711 days. From the 2017 top to the 2019 uptrend confirmation (retest of the breakout / key pivot) it took 706–731 days

3–4 months before the halving the price ranged from 140–190% and now we are ranging 160–220% 3–4 months before the halving. In 2015 the prices reached 380% from the bottom 3–4 weeks prior to the halving, while in 2019 we reached 340% about 320 days before the halving.

Based on all this data far we are either moving at the same pace or slightly faster.

https://www.tradingview.com/x/vddv2VGR/

https://www.tradingview.com/x/ozqLGLoG/

https://www.tradingview.com/x/lUrPA1eq/

https://www.tradingview.com/x/BAa6FsXF/

Now let’s dive into alts:

So far it looks like we are getting ~4 year cycles which coincide with the halvings. Personally I don’t look at the Bitcoin dominance but the Total Altcoin market cap expressed in Bitcoin. The ALTBTC Mcap bottomed ~200 days before the halving in 2015 and this time it bottomed ~250 days before the halving. The distance between the two bottoms is 3.7 years.

The reason why I think that the bottoms is in, is that we had an ~80% correction on total cap, it has been been the largest in % terms over the last 6 years and the bottom came only 60–80% above the previous highs. Some expected a retest of the highs, but that would had been too low considering the amount of altcoins created since then, along with their high inflation rates. The retrace was also perfect and the market stopped at a key level (were two large pumps occurred). Also the reasons I take the 2015 bottom and not the ones prior are that Bitcoin hadn’t bottomed and Ethereum didn’t exist in 2014.

https://charts.cointrader.pro/snapshot/n3ukH

https://charts.cointrader.pro/snapshot/hbw0E

https://www.turtlebc.com/tools/bull_percentage/btc?from_date=2015-08-11&to_date=2018-02-06&exchange=poloniex

https://www.turtlebc.com/tools/bull_percentage/btc?from_date=2017-08-01&to_date=2020-02-11&exchange=binance

As you probably already know altcoins exist to take people’s BTC and if you use them properly you can take somebody else’s BTC. So they really move based on how Bitcoin moves and what the sentiment is around it. People want to either accumulate more off it or believe they have missed the boat so they want to buy something that will be the next Bitcoin.

It seems reasonable that alts bottom a few months before the halving, because the last few people that turn into ‘Bitcoin only’ capitulate and go back into Bitcoin to prepare for the halving, while whales start accumulating to pump alts. The event creates hype around Bitcoin, which draws more attention to the space but as most people are bullish and long BTC due to the halving, it doesn’t make much sense for big plays to just pump Bitcoin straight into the halving without accumulating even more beforehand. With new money coming in and money on the sidelines, that is the perfect time to do it.

At the same time 2 years after the top most old participants have most likely either capitulated or aren’t going to sell soon. Meanwhile new people are slowly coming in, who are seeing alts in the green for the first time and start speculating. So far alts haven’t really pumped that much in BTC terms, but this could be due to the fact that Bitcoin has been going up with them, suppressing their BTC returns.

In 2016 they had pumped significantly a few months before the halving and then most corrected into the halving. Some coins started pumping again into actual day of the halving as BTC had already topped. It dropped, went sideways, dropped again, sideways again and then grind up which lasted a few months. During that period quite a few alts continued significantly higher. This made sense as Bitcoin volatility was down and the halving speculation died down.

In my opinion even Ethereum could have continued higher despite the fact that it already had a huge run. The DAO hack, the ETC fork and all the attacks it had on its network while BTC was slowly going up after the halving along with the speculation of a Bitcoin ETF only led to an 80% drop in BTC terms. If it wasn’t for these events it might had also continued higher and the story might had been quite different. The reason I am mentioning all these is that Bitcoin will most likely dump a few weeks before and a few weeks after the halving which will allow most alts to perform well in BTC terms.

So far many alts have pumped significantly with the overall market is up ~70% from the ATLs while the average ‘good’ coins pumped ~160% on average over the last 6 months. As the market is much larger with many more coins and much larger market caps, we could easily see coins go up 200–300% on average from here but most will top at different times which allows for rotation (flipping from pumped coins to ‘unpumped’ coins)

However all these returns are just for starters. We are very early in this game as we will easily have 3 strong alt season (about every 7–9 months with a few mini seasons in between. Since the 2018 tops we have gotten a few mini alt seasons, but nothing special. That was because there was no new money coming in, while old money kept flowing out.

As Bitcoin has more than doubled in price since the bottom, many people are in profit and they start exploring the space, looking for new coins to diversify into. The altcoins sellers are exhausted and many are sitting on the sidelines, so whales take advantage of that to pump these coins while luring more and more people in. However the sentiment is still pure disbelief and many people are still underwater.

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