Understanding Bitcoin’s market cycles

Markets are governed by market cycles. Analyzing the price movement of Bitcoin over the last decade offers powerful insights into how the cryptocurrency market has evolved to where it is today.

What is a market cycle?

A single market cycle is defined as when the price of an asset goes up (a bull market) and then comes down again (a bear market).

But market cycles are about more than just the numbers – they’re driven by human behavior.

Downtrends are characterized by fear and uncertainty; uptrends are characterized by optimism, increased interest and sometimes a sprinkle of what former Fed chairman Alan Greenspan once coined “irrational exuberance”.

The history of Bitcoin’s uptrends and downtrends

Crypto analysts have long tried to predict the price of Bitcoin. What’s important is not so much the figures they quote, but rather the time scales at which those figures are achieved.

Bitcoin Rate of Return Each Market Cycle
(Each cycle had a 20% return of the previous cycle)

2011: Return of 318,864% = $31.90 High

2014: Return of 58,474% = $1,177.19 High

2017: Return of 11,960% = $19,764.51 High

2022: Potential Return of 2,392% = $78,500.00 Potential High pic.twitter.com/7KP439cpZE

— Josh Rager 📈 (@Josh_Rager) May 14, 2019

Josh Rager, a popular crypto analyst, analyzed Bitcoin’s price surge over the last 10 years and concluded that the next upwards cycle could lead the price to surge as high as 80,000 USD over the next three years.

Then again, back in December 2017, people thought Bitcoin would continue on its rampant upward trend – and that didn’t exactly go according to plan.

These sudden changes in Bitcoin’s market cycle are often caused by less tangible, more difficult to predict factors such as human emotion, public sentiment, media attention and regulatory changes.

The longest Bitcoin bear market was 58 weeks long between 2013 and 2014, when the cryptocurrency lost nearly 86% of its value.

This was around the same time that Mt. Gox was handling 70% of all Bitcoin transactions worldwide.

In late-2013, Wired Magazine reported the exchange had "effectively been frozen out of the US banking system because of its regulatory problems".

In 2018, Bitcoin lost more 70% of its value. This time in the background, however, regulators worldwide started to solidify their stance on cryptocurrencies – for better or worse.

ICOs went through a period of boom followed by public distrust, only to emerge as IEOs (Initial Exchange Offering). As a result, the gradual uptrend we’ve seen again in 2019 can be attributed to the technical development occurring on the Bitcoin blockchain (such as the launch of the Lightning Network) as well as increased institutional investment.

Ultimately, market cycles mirror the cycle of human emotions. We oscillate between greed and fear, and this is what drives prices changes that in turn drive more of that human emotion.

One thing that has become clear is that Bitcoin has evolved far more in the eyes of the public than any other cryptocurrency.

Bitcoin has now established itself as the real “digital gold” – a new form of money that promises to be around regardless of the dips and peaks of the market.