An Update On The Crypto Market Cycle

Bitcoin's next Halving is just 171 days away. At the current rate of block production, it's expected to take place around March 30, 2024.

At that point, the rate of issuance will drop from 6.25 BTC per block to 3.125 BTC per block. Halving events are typically bullish, because there is less new supply available to be sold by miners.

In terms of wider context, Bitcoin put in a bear market low of $15,500 on November 21, 2022, 323 days ago.

At present, BTC is trading at $27,600, down 60% from its all-time high of $69,000.

How does the current situation compare to previous cycles, and what insights can we draw from the blockchain?

A Look At Prior Halving Cycles

As the chart above shows, BTC's current price is exactly in line with the previous cycle, and slightly higher than the one before that. (Note that estimates for the exact halving date vary depending on whether block time is assumed to be the 10-minute target or an average of recent block times.)

Still, it feels as if crypto is in the doldrums. Bullish sentiment at the prospect of an ETF has faded, and macro headwinds remain in the form of higher-for-longer interest rates, the possibility of recession, and now, new conflicts.

As it happens, though, this is (for BTC, anyway) nothing new. It's another feature of this point in the market cycle: When the bottom is in, but immediate optimism has waned and traders remain in a state of uncertainty, bordering on fear. Analyst Ben Cowen draws attention to the correlation between bitcoin in a pre-halving year and the S&P in a pre-Election year (2011, 2015, 2019, 2023): Both put in a correction in August/September. There is also a predictable move in terms of Bitcoin Dominance, as crypto as a whole sells off, but bitcoin is the favorite store-of-value within the crypto space.

So far, then, the current state of the market is nothing out of the ordinary. That's particularly interesting given that this cycle has a very different macro backdrop, in terms of high interest rates and quantitative tightening.

HODLers Step Up Their Game

A step back from the day-to-day noise of the markets shows an interesting picture. The transparency of the blockchain means we can tell exactly how many bitcoins are in the hands of short-term holders, aka traders, and how many are controlled by long-term HODLers. Right now, less than 12% of all BTC has changed hands in the last three months, which is an all-time low. The last time it was anything like this low was heading into the capitulation of November 2022.

In other words, bitcoin is being hoarded by those who don't seem inclined to sell. This dynamic is also evident from the historically low amount of BTC held on exchanges, as investors withdraw coins to custody themselves (rather than have them ready to trade at short notice).

Lastly, for all bitcoin's recent weakness, it's all relative. Bitcoin has performed better year-to-date than any other major asset class, having started the year at $16,500. In fact, it has performed twice as well as the next contender on the list, US Large Cap Growth stocks.

All in all, then, while the market is currently suffused with uncertainty and anxiety, bitcoin isn't doing anything it hasn't done at this point in previous cycles. That's not a predictor of future outcomes, but it helps put the present bearish sentiment into context.

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