In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is shown on March 5, 2024 in Paris, France.
Chesnot | Getty Images News | Getty Images
Bitcoin has not reached the top of the current appreciation cycle and is likely to go through an all-time high this year, according to a research report released by CCData on Friday.
Bitcoin hit an all-time high above $73,700 in March, but has since traded in a range between roughly $59,000 and $72,000.
The journey to record highs in March was largely driven by the approval and launch of spot bitcoin exchange traded funds, or ETFs, in the US in January. They have attracted net inflows of around $14.41 billion so far, according to CCData.
ETFs allow investors to buy a product that tracks the price of bitcoin without owning the underlying cryptocurrency. Crypto supporters say this has helped legalize the asset class and made it easier for larger institutional investors to participate.
A bitcoin “cycle” refers to a period of time when the digital currency rises to new records, then falls again to enter a bear market or “crypto winter.” These cycles – of which three have now been completed since the launch of bitcoin – have tended to follow a similar pattern.
That has centered on an event called halving, during which the reward for miners is cut in half, reducing the supply of bitcoins to the market.
Typically, halving often occurs months before bitcoin reaches its all-time high for the cycle. The cycle is different now. Bitcoin rose to a new record high before the halving due to bullishness around ETFs in the US
With bitcoin trading in the range after an all-time high, many are questioning whether the cryptocurrency has reached the top of its current cycle.
A CCData report, which examines historical bitcoin price movements, suggests it can. The data and research firm said that historical trends show that halving events have always been preceded by periods of price expansion that can last anywhere from 366 days to 548 days “before producing a top cycle, with each halving experiencing a longer cycle than the previous one. , because asset class maturity and declining volatility.”
The last bitcoin halving took place on April 19 of this year, so that historical moment has not yet passed.
“What’s more, we have observed a decrease in trading activity in the centralized exchange for almost two months after the halving event in the previous cycle, which seems to have mirrored this cycle. This shows that the current cycle can expand further into 2025,” said CCData.
Analysts acknowledged that the “influence of institutional participants in the industry” in the current cycle has “changed the previous trend,” adding that less trading activity is possible in the third quarter – which may suggest more lopsided prices. .
“However, the data and previous trends are strong enough to suggest that any sideways price action is temporary, and we are likely to publish before the all-time high once again before the end of the year,” CCData said.
The company’s report states that the upcoming launch of the Ethereum ETF in the US and other similar products around the world “will bring more capital, liquidity and demand to the asset class.”
CCData highlights another important historical data point to support its thesis – it says that bitcoin’s price appreciation took place over a short period of time. For example, in the 2012 cycle, 91.4% of bitcoin’s overall price expansion from halving to record highs occurred in the four months prior to the peak of the cycle. The share of these price increases was 78.8% and 71.5% in the four months before the record highs in the 2016 and 2020 cycles.
“That parabolic expansion has not been done in the current cycle,” CCData said.
Other commentators have highlighted how historical patterns in bitcoin have played out.
“Historically, the market cycle peaks 12 to 18 months after the Bitcoin Halving, which last took place in April this year. We have also not seen volatility reach peak heights before. Finally, before the peak market cycle coincides with the rapid succession of everything. high time – up from 10 to 20 new highs set in a 30-day window,” Thomas Perfumo, head of strategy at cryptocurrency exchange Kraken told CNBC via email.
“We haven’t triggered that signal yet.”
