Wall Street’s so-called “experts” are creatures of habit. They behave in patterns that are as predictable as the tides.
When a market soars into bubble-land, they pour out of the woodwork to cheer the “powerful fundamental forces” that are driving prices higher.
When the bubble inevitably bursts, they scramble to predict its demise.
And precisely when a brand-new bull market is in the making, they pronounce its last rites.
Rarely is this pattern as clear as in cryptocurrencies, a much-maligned asset to begin with.
Here are two strident Bitcoin eulogies. One refers to the “mother of all bubbles.” The other says that there’s no future in crypto.
Neither mentions that both the market and the market analysts are subject to the same cyclical pattern that repeats itself regularly.
Bitcoin enjoys a massive bull market, culminating in a frenzied parabolic surge of speculation – the period we call “the climax.”
It comes crashing down as speculators beat a panicky retreat.
It consolidates for months, creating a dead zone of sideways action or further decline, from which only the diehard survive.
And it launches a new bull market, repeating the cycle – again culminating in a blast-off climax.
But here’s the key: The story begins in September 2010, just eight years ago, when Bitcoin was trading at close to 6 cents. Today, this same asset is trading at around $3,600 per token, a return of over 5.9 million percent.
No, the path from a half-dozen cents to thousands of dollars isn’t easy. Nor is it a straight line. But that’s the whole point: It happens in a cyclical pattern, and that cycle is ultimately predictable.
Bull cycle #1
September 2010 to June 2011
Bitcoin begins the cycle with a powerful but non-parabolic rise – from 6 cents to 80 cents by April 2011. Until this point, the rise is driven mostly by Bitcoin users and long-term investors who understand the technology and share the vision of its founder.
Then, suddenly, average investors begin to pile in. But the market is still minuscule, extremely illiquid and unable to accommodate crowds.
So prices go ballistic: Bitcoin literally blasts off to the stratosphere, surging from 80 cents to a high of $36. (See blue-highlighted area of chart.)
The crash follows immediately thereafter, as Bitcoin plunges by 93%. Much like today, naysayers re-emerge – ranting about “a failed experiment,” raving about “the death of Bitcoin.”
Bull cycle #2
October 2011 to April 2013
Like in the prior bull cycle, Bitcoin enjoys a very solid run from its $2 low to about the $10 level, up fivefold.
Long-term buy-and-hold investors (nicknamed the “HODLers”), who bought early in the prior cycle, are delighted. But anyone who joined the prior cycle during the frantic run-up to $35 is still frustrated.
The frenzy returns in early January. The king of cryptos breaks out above $13 and starts accelerating to the upside once again, exploding to a nosebleed bubble high of $260 in April 2013.
Total rise from bottom to peak: about 13,000%. But again, the overwhelming bulk of the move is jammed into just two short months, from February 2013 to April 2013.
The bust strikes with even-greater fury. In less than a week, Bitcoin is back down to $50 by April 15 – an instant 80% crash.
Bull cycle #3
April 2013 to December 2013
As before, the recovery from the April low of $50 is initially slow, reaching the $100 level by Oct. 1, 2013.
And as before, it’s the last two months that deliver the giant price explosion – to $1,160 by December, a surge of 1,160%.
Irrational exuberance infects not only average investors, but also the media, which sings the praises of crypto … until, that is, the next bust strikes, ushering in Bitcoin’s longest bull market at that time.
From its $1,160 high made in December 2013, Bitcoin plunges to a low of $150 by January 2015, an 87% decline.
The bear market is so long and so deep, Bitcoin evangelist Andreas Antonopoulos says he’s worried about the future of crypto.
But as before …
Even at the bottom, investors who bought at the beginning of the cycle still have tripled their original investment.
Moreover, this point is also the beginning of the greatest Bitcoin bull market of all time …
Bull cycle #4
January 2015 to December 2017
It takes Bitcoin a couple of years to recover from its great bear market of 2014.
Then, the big action begins in 2017, as Bitcoin launches a solid move from roughly $1,000 in January to about $5,000 in October.
As in the three previous cycles, however, it’s not until the last two months of the bull run that the public jumps in with both feet. Prices rise like a rocket. Bitcoin surges to its high of nearly $20,000 by December.
And of course, the crash inevitably followed – taking Bitcoin down to $5,800 on Feb. 6, 2018, a 70% decline, and further down to $3,600 one year later.
Many analysts, not personally familiar with the prior bull cycles, argue as if this is somehow “a new phenomenon.”
But as you’ve clearly seen, it’s anything but.
It’s déjà vu.
Juan M. Villaverde, Weiss Cryptocurrency Ratings
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