Bitcoin moves by cycles. After the crypto winter, a thaw comes, followed by a bull run and a renewal of the all-time high (ATH). Every cycle has its own bottom, that is the local minimum opening the best opportunity to purchase crypto for a long-term investment. That is why all members of the crypto community are so excited about finding it.
In this article, we’ll try to understand when the BTC bottom usually forms and find out if bitcoin has already bottomed out this time.
What is the Bitcoin bottom and why is everyone chasing it
Let us begin with basic definitions in order to understand the meaning of the 'Bitcoin bottom' term. Bitcoin (BTC) is the first and most capitalized cryptocurrency. Its movements are cyclical: the coin reflects its behavior from past years.
The thing is that the bitcoin supply is limited. The market will see only 21 million coins mined by miners. That is why every 210 thousand blocks the system uses to "pack" transactions, a halving occurs. It takes place about once every four years.
Miner is a member of the crypto community who is engaged in mining (the process that includes cryptocurrency extraction from its network). It makes mining an analogy of emission (the process of money issuing). Miners connect the computing power from their computers and other digital devices to the project's network and use it to solve the tasks on the network with the goal of receiving cryptocurrency.
Changes mean halving a coin's mining speed, which also leads to the halving of the miners’ reward. In the face of rising demand for digital assets, halvings cause a shortage of BTC in the market, pushing the coin rate up.
The crypto community found out that halvings always launch new growth cycles that help the cryptocurrency reach its new ATH. The thing is that every single maximum, as observations show, is followed by a cyclic minimum, the so-called bottom.
A few words about BTC's cyclical movement
So, bitcoin reacts to halvings. We can visualize its impact, for example, using the rainbow BTC chart. The vertical lines indicate halvings. The black curve is the bitcoin price. The rainbow is a color indication that helps understand the scale and speed of BTC price changes against the backdrop of halvings. Here are the details:
The blue is a lowest-priced zone. This is the best time to buy coins so that you can profit from their potential growth. The cryptocurrency had halvings near this level three times already.
The green and yellow zones means that cryptocurrency can still be relevant for making money on long-term investments.
The orange zone is where the price bubble starts. When you reach one of the levels, you should probably consider selling the coin after purchasing it at a lower color level.
The red zone means that maximum prices have probably been reached. As the price steps into the zone, it is a signal to sell coins. Bitcoin tends to go red in the first half of the cycle after the halving.
BTC's behavior in previous cycles
📉 Bitcoin bottomed after the 2012 and 2016 halvings near -85% of the ATH. The lowest BTC price after the 2020 halving is only 77% below the all-time high.
⏰ The Bitcoin decrease from the ATH to the bottom after the 2012 and 2016 halvings took 410 and 363 days. The average number of days is 386.5 (410 + 363/2). Now it is 460 days since the coin reached its last ATH.
The biggest decreases in bitcoin's history, including BTC's bottom amid the 2012 and 2016 halvings chart will help to understand.
What we need to know about the next Bitcoin halving
📎 If there are no significant changes in bitcoin's network, it will occur in the spring of 2024. Provisional date: April 30, 2024.
📎 The next halving will reduce the reward for a mined block from 6.25 to 3.125 BTC.
Bitcoin has bottomed out
The main argument in favor of bitcoin having already bottomed is timing. We have already found that BTC reached cyclical lows on average 386.5 days after the ATH. It has been 460 days since the last bitcoin all-time high. So, the bottom has probably already left behind.
Some market indicators also point out that BTC has already reached the bottom. For example, a "golden cross" pattern (in the right corner of the chart above) indicates that a downtrend turned into an uptrend, which is formed by the average curves reflecting the 50- and 200-day average coin price (red and green curves).
The chart also shows that BTC has gone beyond the falling wedge (marked with red lines), a technical analysis figure that cryptocurrency has been moving in since the summer of 2022. According to the tech analysis, changes indicate that the downtrend has dried up. Despite the correction after new local highs in January 2023, the trend remains positive.
Famous analysts including Pantera Capital and Osprey Funds agree with the opinion that Bitcoin has passed a cyclical bottom.
The bottom is still ahead
In favor of forecasts that predict a potential bitcoin drop to the new bottom, observations indicate that the coin's decrease within the cycle was insufficient. The cryptocurrency's local minimum after the 2020 halving is only -77% from its all-time high. In previous cycles, BTC bottomed at -85% of its ATH. Accordingly, the coin still has a gap to fall.
The negative arguments are exacerbated by global financial regulators' fight against high inflation. In our previous article we discovered how the US Fed's actions affect the stock market, which is followed by the crypto industry.
Regulators are also tightening control over the cryptocurrency market. In 2023, the staking industry and stablecoin issuers managed to fall under the scrutiny initiated by the US Securities and Exchange Commission (SEC). The watchdog saw violations of the securities law in both directions. With increased pressure and tension between the SEC and the crypto industry, new digital market bottom risks are pretty high.
Another pressure factor is the lack of stability in the geopolitical arena. Market participants usually find safe harbor during such periods in time-tested assets. Cryptocurrency, unfortunately, is not one of them.
So yes or no?
We don't know. It depends on your belief. The timing based on the analysis of BTC's cyclical behavior suggests that the cryptocurrency has most likely already bottomed. At the same time, the current state of the financial markets makes it difficult to predict that crypto investors will not experience new lows.
It is possible that the cryptocurrencies' exchange rates will decrease against the backdrop of tightening the rhetoric of regulators and due to pressure on the mining industry, which negatively affects the environment and with which ecology activists are heavily fighting.
Anyway, seems like now is the best time to buy BTC at a lowest rate. Using itez you can purchase crypto with a bank card in a matter of minutes! ⚡️
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This material is not an investment recommendation. The financial and other transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about conducting any operations with cryptocurrency and / or tokens.