Exploring Bitcoin's 'Up Only' Market Trend: Reality or Myth?

• Understanding Bitcoin Price Trends and Purchase Times
• Bitcoin Price Movements and Halving Cycles
• Previous Bitcoin Cycles
• The Current Bitcoin Cycle
• Will History Repeat Itself?
• The Unknowns of Spot Bitcoin ETF
• Potential Market Melt-Up
• Bitcoin Investment Strategy

Understanding Bitcoin Price Trends and Purchase Times

Many people associate the rise in Bitcoin$42,260 -0.64% prices with the perfect time to invest. However, a close look at past trends and price action before Bitcoin halvings suggest that a hefty investment at this time might not be wise, despite the potential approval of spot Bitcoin ETFs, possibly as early as January.

Bitcoin Price Movements and Halving Cycles

Historically, the Bitcoin halving cycle, which lasts approximately four years, has been characterized by dramatic price surges in the 18 months following a halving, followed by a significant drop and range-bound trading for the remaining two and a half years of the cycle.

Previous Bitcoin Cycles

For instance, from late 2013 to mid-2016, Bitcoin's price fell from $1,166 to $156 before rebounding to $780, losing 40% to settle at $472 in August 2016, a month after the second halving. Likewise, Bitcoin's price fell from $19,666 to $3,150 from late 2017 to late 2018, rebounded to $13,882, and then fell 72% to $3,867 by March 2020, two months before the third Bitcoin halving.

The Current Bitcoin Cycle

Currently, another two-and-a-half-year period preceding a Bitcoin halving is drawing to a close, expected to end in April 2024 with the fourth halving. During this period, Bitcoin's price fell from $69,000 to $15,522 before rebounding to $44,759, reflecting a 65% rebound mirroring the 67% and 70% rebounds of the two previous cycles.

Will History Repeat Itself?

Investors are left wondering if Bitcoin's price will retrace significantly before the next halving, as was the case previously. If Bitcoin's price falls 40% from these current levels, its price would stand at $26,855. If it falls 72%, its price would be $12,532.

The Unknowns of Spot Bitcoin ETF

The approval of a spot Bitcoin ETF and its potential effect on the Bitcoin market remains conjectural. Some anticipate a buy the rumor, sell the news event, where Bitcoin's price rises in anticipation of the ETF announcement but sells off once the ETF is announced. Others foresee a buy the rumor, buy the news event, with Bitcoin's price rising both before and after the ETF announcement. However, the impact of a spot Bitcoin ETF not being approved is also a possibility that could lead to a substantial drawdown in Bitcoin's price.

Potential Market Melt-Up

Given the current market situation with high asset prices, some outlets suggest we may be in a melt-up - a parabolic rise in asset prices before a catastrophic crash. This theory seemingly aligns with Bitcoin's current price movement, but the two pertinent questions that arise are, how high will Bitcoin's price rise before it crashes, and which investment strategy is best suited for the situation?

Bitcoin Investment Strategy

HODLing Bitcoin and using a dollar-cost averaging strategy have proven to be successful for those who have held Bitcoin for more than four years. However, it may not be wise to invest heavily in Bitcoin, especially with leverage, during this potentially euphoric market period. In the event of a massive drawdown in Bitcoin's price, it's better to have cash ready to invest rather than find yourself without Bitcoin and cash due to overambitious investing.

No one can predict with certainty where Bitcoin's price will go. It might rise steadily into and beyond the halving, or history could repeat itself with Bitcoin experiencing a significant drop as the April 2024 halving approaches.

Edited by Jonathan Stoker