Investors Are Wrong About What’s Coming Next on Bitcoin.mp4

If you had invested $10,000 in Bitcoin back during the 2015 bear market bottom, it would have turned into $1 million just 35 months later. That same $10,000 invested in the 2018 bear market bottom would have grown to $200,000 over the next 35 months. But in both instances, Bitcoin saw over a 75% decline in the following 12 months. Fast forward to today's bull run, and Bitcoin has already delivered over an 800% return from its 2022 bear market bottom. But more importantly, we've now reached the 35-month window that coincided with the end of the last two bull markets. This timeline pattern is actually rooted in what's known as the Bitcoin 4-year cycle theory. According to this, the first 35 months after a bear market bottom make up Bitcoin's recovery and expansion phase. And following 12 months then mark the contraction phase, as the market enters a painful unwind that resets the cycle. This timeline comes from Bitcoin's halving cycle, which happens roughly every four years. Each halving cuts the reward miners receive for validating new blocks in half, instantly reducing the supply of new Bitcoin entering the market. This supply shock often takes several months to fully work through the system. But as fewer new coins are created, existing supply becomes scarcer. And with demand staying steady or rising, that scarcity creates upwards pressure on price. We can see this cycle more clearly through this chart showing Bitcoin's 4-year performance following each halving event. In the 2015-2018 cycle, Bitcoin's halving took place in July 2016. What followed was a sharp rally for roughly 530 days, or about 18 months, before Bitcoin entered a 12-month bear market and then a 17-month recovery period. We saw something similar play out in the 2018-2022 cycle. The halving in May 2020 was followed by another powerful 18-month expansion, before price peaked and entered a 12-month bear market, once again followed by a 17-month recovery phase. In the current cycle, Bitcoin's most recent halving occurred in April 2024, about 18 months ago. That puts Bitcoin right at the danger mark once again. So whether we measure from the bear market low or from the halving date, Bitcoin now faces a real risk of putting in a bull market top this month if the 4-year cycle timeline holds up this time around. And if that's the case, then we could be at the precipice of another big bear market decline. But compared to the last two cycles, there are two key forces for Bitcoin today that didn't exist earlier and could have a major influence on the 4-year cycle. The first key factor is monetary policy. This chart shows the federal funds rate, which tracks the interest rate set by the U.S. Central Bank. If we put Bitcoin's price on top, we see that heading into the 2017 bull market top, the Fed was already tightening monetary policy, taking rates from near 0% all the way to 2.5%. Higher rates makes borrowing more expensive, which slows down economic activity and reduces the amount of liquidity that can flow into risk assets like Bitcoin. We saw something similar heading into the 2021 bull market top. The Fed had begun signaling rate hikes to contain inflation, and that shift in policy once again brought Bitcoin's rally to an end. Today, however, the setup is completely different. The Fed has already begun cutting rates and is expected to continue doing so over the coming months. Easier monetary policy means cheaper borrowing costs, higher liquidity, and a stronger backdrop for risk assets like Bitcoin. And looking ahead to 2026, markets expect President Trump to appoint a new Fed chair, one likely to favor even looser policy, which could mean more rate cuts than even what's currently being priced in. So from a monetary policy perspective, this cycle is a polar opposite to the previous two cycles. The second key factor is institutional demand. This chart shows the number of Bitcoin bought by institutions each year compared to the number of new Bitcoin added to supply, essentially capturing the demand and supply balance. In the last cycle, we can see that new supply consistently exceeded institutional demand. But that trend completely flipped in 2024, as institutions bought over 900,000 Bitcoin, while only around 220,000 new coins were added to supply. And this year, the imbalance has become even more extreme. Institutions have already accumulated over 975,000 Bitcoin, while only around 135,000 tokens have been created through mining. That means demand is now running at more than seven times the rate of new supply entering the market, something that wasn't present in the last two cycles. This has been one of the primary driving forces behind Bitcoin's strength throughout this bull run. But despite the overall price appreciation, Bitcoin has still not seen the type of extreme returns that it saw. Heading in the last two bull market tops, this chart compares Bitcoin's price to its long-term on-chain value. The shaded area represents how far Bitcoin's market price has moved above or below that underlying value over time. When it stretches far above, it shows that price is running ahead of fundamentals, which is a sign of growing euphoria. And when it dips deep below, it reflects periods of undervaluation. Heading into the 2017 bull market top, that gap expanded to 0.9, meaning Bitcoin's price had risen nearly one full magnitude above its on-chain value. The same thing happened again in 2021, when Bitcoin became extremely overvalued before the bear market began. But this bull run, that gap has not crossed the 0.6 mark. This tells us that Bitcoin hasn't yet entered the phase of irrational exuberance we typically see heading into major market tops. So we think it's possible that easier monetary policy and rising institutional demand continues to fuel this bull run for now, potentially extending the four-year cycle. In fact, if we look all the way back at Bitcoin's first full cycle from 2011 to 2015, and compare it with the 2015 and 2018 cycles, we see something interesting. The 2011 cycle was actually shorter by almost a year. At that time, Bitcoin was still a young and emerging asset. Because of that, prices responded much faster to changes in capital flow and demand, leading to explosive gains early on and an earlier top compared to the usual four-year cycle. It could be that we're seeing the exact opposite dynamic play out today. Now, I want to be clear, we could be completely wrong about this. And this is what trading is all about. It's about weighing the odds of certain things happening and placing bets on them, all while managing our risk in the event that we're wrong about these things happening. Right now, we are actively looking for attractive long opportunities in the crypto market heading into the end of 2025. It's entirely possible that we need to adapt this position if the data changes. At Bravo's Research, we teach you how to trade cryptos, how to pick great trade setups. We give you the buy and sell alerts for all of our positions and provide market analysis multiple times a week. You can click the link in the description down below to join our community.