As with any investment, markets all have cycles. The recent drop in price of Bitcoin (BTC) was shocking for many holders and crypto traders, but this is nothing new.
The slump in price had many traders moving funds out of Bitcoin and looking for other trading options in altcoins and digital assets, which is what we saw on popular trading platforms such as Coinbase and Kraken.
The problem with cryptocurrency and market cycles is that the markets have always been highly volatile and not shown any real consistency in the short term. Looking at Bitcoin, there are clear consistencies in the long-term. The crypto leader has been on the market for over a decade and has shown to be a coin that will be here for some time yet.
However, in the short-term we are now seeing computing cryptocurrency cycles emerging, as a wealth of data has become available to analysts. We will explore these consistencies and what they mean for predicting the price of Bitcoin.
Understanding Bitcoin cycles
Earlier this month we saw Bitcoin rise to a staggering $61,000, which meant the price of Bitcoin has risen an average of just over 60% in the past five years. Normally, when Bitcoin has a strong month, this is then followed by four months of a weaker price on the market.
While the cycles are only starting to show any kind of promise in terms of accuracy of data, there is certainly something to read into this. It would appear that the daily cycle matches the monthly cycle that is in buy mode, while the weekly cycle is point towards selling. There still needs to be more data collected in order to provide any validity to claims made, but it’s very promising.
It’s well-documented that Bitcoin has four yearly cycles, with the price expected to rise dramatically throughout the year of 2021, topping out sometime towards the end of the year. This may be accurate, but when the drop comes will be the main point of contention for many traders.
Something that has always been a factor deterring investors and financial instructions from committing to crypto is the volatility of the market, no less for Bitcoin. However, there are signs of that volatility flattening out, relatively.
Firstly, we’re seeing the rise in interest from mega-banks offering investment portfolios to clients interested in cryptocurrency trading. The latest to do so is the American giants JPMorgan Chase, who will be offering crypto asset investment portfolios to selected clients by summer this year.
This kind of move adds credence to the idea that cryptocurrency investment is viable as a stable, long-term solution for clients.
Data shows that Bitcoin’s volatility has been moving in a downward direction, with the price of BTC hovering somewhere between $50,000 and $60,000. While a fixed position for a market with a $10,000 fluctuation may not match up to what is expected within an investment portfolio, this is a new type of product.
Volatility is both dangerous and attractive to investors. So, if the portfolio is properly managed, there is no reason why we won’t see these kinds of investments being offered more broadly. What Bitcoin needs is a long-term trend of lower volatility and this would certainly change public perception—ultimately changing the way investors view digital assets.
2021 has been the most important year yet for blockchain and cryptocurrencies, with the emergence of a range of innovative products like NFTS and the development of the DeFi ecosystem. There is still a lot of work to be done, but crypto evangelists will certainly have a big smile on their faces as we march towards a mainstream acceptance of Bitcoin.