The most capitalized cryptocurrency celebrated its 10th anniversary last January. Ten years since the first block was mined by the mysterious creator Satoshi Nakamoto.

A bit of history

During the last decade, and very possible of the last 100 years, Bitcoin has been the most profitable asset (or currency) in the whole market. The first known person who tried to set a price to the electronic currency was a user called “SmokeTooMuch”, who around the end of 2009 auctioned 10,000 BTC for $50. However, no buyer was found.

It was in March 2010 when BTC made its first step out of the total illiquidity when the first bitcoin exchange was released, BitcoinMarket.com. The kickoff price for the one and only cryptocurrency was set at the ridiculous value of $0.003. To picture this, if you would’ve bought just $1 worth of Bitcoin back then, at the time of writing your crypto portfolio would be worth $3,389,029.94. As we mentioned before, the most profitable asset on earth.

Of course, the path from $0.003 to $20,000 hasn’t been a straight line all the way from the bottom to the top. With very steep ups and downs, Bitcoin has been continuously breaking historical maximums. As a matter of fact, since its price is being tracked, there hasn’t been almost any month of September in which the price hasn’t decreased.

Bitcoin price each September since 2011
2011: $9 2012: $14 2013: $130
2014: $468 2015: $230 2016: $600
2017: $4,605 2018: $7,645 2019: $10,730

Is Bitcoin cyclical?

In view of this, any bold trader would wonder if there is any kind of cyclical component in the Bitcoin price and how can he benefit from it. But, is BTC really a cyclical asset? Let’s start by defining what is a cycle.

Market cycles are trends or patterns that arise during specific market conditions and repeat over time. Many crypto enthusiasts identify Bitcoin cycles as follows:

  1. A bull run breaking historical maximums takes places
  2. The pump suffers a correction from 70 to 90% of the price.
  3. Finally, after some time Bitcoin starts gaining bullish potential to the extent that it breaks its maximums again.
  4. Repeat

This is a very particular case due to its volatility and unbelievable increases. Well, it had to be since it probably is the most profitable asset in mankind’s history. Now, is it the case? Has the pattern described above-taken place enough times to consider it as a cycle? Let’s take a deeper look at the Bitcoin chart.

Since 2011, the Bitcoin price has broken historical maximums significantly 3 times. The first major breakout happened in April 2013, when the price increased an astonishing 1,600% until it reached its new maximum at $260. The next one would be just around the corner, in December 2013 the price broke $260 to set the new all times high at $1,160, an increase of 360%. Last but not least, the most recent and famous pump so far, the one of December 2017. It shattered to pieces the previous maximum after increasing by 1,580% and pushed the price to $20,000.

Regarding the corrections or pullbacks, these have represented a decrease of -77%, -86% and -84%, chronologically ordered. Even the historical Bitcoin price data is still very scarce, even less than 10 years, we start having some variables and data to assess whether Bitcoin could be cyclical or not.

Looking at the three occasions in which Bitcoin has had breakouts and retracements, it is possible to find certain similarities among them. For example, historically, every pullback has had a similar size. The pump of April 2013 and December 2017 represented an almost exact percent increase, 1,600%, and 1,580%

But not every argument is pro-cycle. Against this theory, we could argue that the time between pumps is pretty irregular. So far, it has varied from 7 months to 4 years. Some other facts, as the appearance of new and promising crypto projects, could have driven the price up, then leaving the cyclical variable out of the equation.

We need more data, but we have some hints

Data equals time, and we will have to wait some years, maybe decades, to learn more about the technical behavior of this groundbreaking technology. However, we can be sure that the Bitcoin price, even in its early stages, is telling us something about its cyclicality.

Nevertheless, this particular case won’t last long once it starts to be clearer that Bitcoin is cyclical. After a potential new bull run, investors and traders will assume that the electronic coin will repeat the pattern again.

This assumption will create a huge demand for BTC to take advantage of its incredibly high potential profits. This will bring the Bitcoin price closer to its long-run (and stable) level. Then, driving the price to the point where all the profit opportunities have faded and its value won’t be as volatile as it has been since its inception.

 

Check out the previous blog: Top 5 Risks For Crypto Traders.


A historical maximum is defined by the last pivot before a significant and extended fall of the Bitcoin value.