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What Is A Left-Translated Bitcoin Market Cycle?
It's possible that a flood of institutional capital could push BTC to an early cycle high.
On Monday, bitcoin pushed markedly higher on growing anticipation of an ETF approval, also boosted by confidence that inflation is back under control and interest rates will be cut in the coming months.
Bitcoin's rapid price increase in recent weeks is prompting speculation that this bull run might peak earlier than on previous occasions: A so-called Left-Translated Cycle.
Front-Running The Peak
Every previous bitcoin market cycle has ended in a blow-off bubble top at the end of three years, followed by a roughly year-long bear market. Despite a number of analysts forecasting an extended cycle last time (most notably Ben Cowen), this held true for the 2018-2022 cycle.
In this time different?
A left-translated cycle would entail an aggressive run-up earlier than usual in the four-year cycle, followed by a longer bear market. This is logically something that would fit for the current cycle, for at least two reasons.
- The more firmly a pattern is established in the markets, the more it will be front-run in the future by traders who believe they know what is about to happen.
- Everyone knows big (institutional) money is coming, and that's worth front-running in its own right.
What would likely cause a left-translated cycle is if money poured into bitcoin (including any ETFs), at the end of this year and early next year, so fast that the rally became unsustainable.
In essence, the majority of the funds to be allocated to bitcoin this cycle would be deployed over the next few months. This would drive the market rapidly higher, but there would then be relatively few traders prepared to come in at those elevated prices. At that point, a correction, if not a long bear market, would be on the cards.
The overall cycle could peak early, perhaps with a two-year bear market. Alternatively, the initial bubble peak could be followed by a second top towards the end of the cycle. This was the pattern in 2019.
Another possibility is that bitcoin will now leave behind its four-year cycles, as institutional money enters, crypto matures as an asset class, and the Halving has less of an impact.
It's impossible to make any clear forecasts for bitcoin. Market are inherently unpredictable, and the current situation is unprecedented. We might look at gold (which enjoyed a strong bull market after the first ETF was approved in 2004) for a helpful parallel, but that's all it can be: A potential guide, not a roadmap.
Currently trading around $42,000, bitcoin is up around 170% from its bear market low 54 weeks ago, on November 21, 2022. At the end of the prior cycle, BTC bottomed in December 2018 and quadrupled in price in just six months.
Those were very different times, but it still goes to show how fast things can move in the crypto markets.
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