Bitcoin Cycles

Since Bitcoin’s inception, it has moved in somewhat predictable 4-year-long cycles. These cycles make investing in Bitcoin at the correct times evident if we know what to look out for.

Due to Bitcoin’s high volatility, the superior investor who enters the Bitcoin market at the right time as well as exits at the right time can reduce their risk exposure immensely, as well as have a greater chance of profitability.

The opposite is also true for the gambler. Due to Bitcoin’s volatility, it can become highly speculative, especially at the peaks of the market. These peaks cause the gambler to enter into positions at the wrong time, and the consequences of taking on those types of investments can be catastrophic.

Bitcoin cycles have been predictable and acted somewhat the same in the past, yet as we know there is no such thing as a sure thing with investing. In this article I will outline how I think the 4-year Bitcoin cycles work, it is important to note however that this is not an indication of what will actually happen in the future. Like any other investor, all we can do is hope for the best outcomes on our predictions, and alter those predictions when circumstances change.

In our quest to become superior investors, we must take a deeper look at the overall 4-year cycle patterns and understand those market cycles better than the speculative investors and gamblers. By understanding the 4-year cycle patterns we can form opinions about what the market will do and create plans around those opinions, this can help us deal with the overall aspect of randomness the market will inevitably throw our way. By creating an opinion as well as our plan, we can have a sense of where we stand in a cycle and create an edge that only the superior investor possesses.

Through this article, I hope to create a better understanding of Bitcoin’s 4-year cycle patterns.

Much of this information was inspired by Bob Loukas and formulated from his YouTube Channel.

If this article piques your interest I would highly recommend going through Bob Loukas’ videos on his YouTube. Studying his videos from day 1 covers Bitcoin’s previous 4-year cycle from beginning to end and the insights from watching his videos are priceless.

The Bitcoin 4-Year Cycle

(Chart shows Bitcoin's 4-year cycles from each cycle bottom. 4-year cycles are called that, but don’t necessarily line up exactly as being 4 years in time).

Just as in any other market the Bitcoin 4-year cycle is made up of 3 types of investors, each investor will enter the market at 3 different stages in the cycle.

I will also add a 4th stage to our current 3. This 4th stage will be called “no man’s land” as it is the stage that no investor should be entering into the market.

During no man’s land, the superior investor will be entirely out of the market and waiting patiently on the sidelines for the right time to re-enter.

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Stage 1 — The superior investor enters at the time when the bear market is reaching its climax and Bitcoin has finally formed (or is close to it) a bottom and also finalised the completion of its previous 4-year cycle.

During a bear market, nearly everyone is selling, the only investors who are not selling are those who have conviction the market will reverse course eventually, those who aren’t paying attention, and those who still hold onto a belief a bear market may not be present and that the market will reverse soon.

As bad news follows bad news during the bear market, the price will decline to reach a climax of peak capitulation. This can become the best opportunity to begin buying. When everyone else is depressed selling, the superior investor begins buying.

The completion of the 4-year cycle is marked by a low that lines up roughly (does not have to be exactly) 4 years time from the previous cycle low. Although the price peaks can vary from cycle to cycle, the price bottoms stay fixed.

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Stage 2 — The speculator stage is the time when the price has risen and those who are still paying attention to the market but have not bought in begin to make their investments.

This stage takes the longest as those who felt they did not have the opportunity to sell during the previous bear market now have a chance to get out of their positions.

This stage 2 period can become incredibly boring, as it is the 2nd stage of a cycle and the stage where most gamblers or late speculators are not paying attention. However, the superior investor pays attention at this stage, they know that the price cannot stay suppressed forever, and eventually stage 1 and stage 2 investments will become solid bases for stage 3 selling.

This stage is crucial to a healthy 4-year cycle because it sets the foundation for the next leg up.

We have not seen a big run during stage 2 in previous 4-year cycles and it is important to note that during stage 2 any price movement upwards that breaks past the previous 4-year cycle high is an indication that the market is behaving abnormally.

For each Bitcoin 4-year cycle so far, the big parabolic price movements into new all-time highs happen past the 18-month mark from the previous 4-year cycle low.

If any parabolic price movement happens before this point it is a good idea to be wary of any quick price declines. Investors should be questioning how sustainable a price rally that takes the price to new all-time highs is if it occurs before the 18-month mark.

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Stage 3 — The gamblers re-enter the market. The gamblers buy back in due to hype during this stage. They have not completed any research, nor have paid attention to the market. The only reason they come crawling back is due to good news being broadcasted, as well as those around them making money.

Stage 3 so far for every previous Bitcoin cycle has had parabolic price movements upwards, as well as broken into a new all-time high. The general outlook at this time is that the next parabolic move will happen in mid to late 2025 (as it lines up with previous 4-year cycles).

A key thing to remember is that although previous cycles have acted this way it does not mean this cycle will behave the same.

The superior investor has a plan for the bad outcomes as well as the good, and we must consider the likelihood of this cycle not behaving the same.

When we create a prediction of different probabilities for what could happen we can better plan for most outcomes. This way we can adopt correct risk management strategies that some speculators and gamblers do not possess, and try to hedge our positions against any potential downside.

Stage 3 is filled with greed. While the gambler looks to enter the market during this phase, the superior investor is planning on how to exit and reduce their risk exposure.

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Stage 4 — No man's land. This is the point in the cycle the superior investor has no part of, and sitting on their hands is the only right thing to do.

A superior investor does not have to outperform the market during the good times. The true test of a superior investor is whether they can outperform during the bad times.

The goal is to maximise profits during bull runs, take profits early to reduce risk and be completely out of the market during no man’s land. If an investor can pull this off, they will have outperformed 95% of all other market participants.

The key during no man’s land is to have capital there ready to deploy. When everyone is selling or even better being forced to sell, the superior investor is there ready to scoop up any deals that are heavily undervalued.

Left Translated and Right Translated Cycles

The price peaks within the 4-year cycle can vary, so far every peak has occurred in the second half of the 4-year cycle. This has been the case thus far but it does not mean the price peak cannot happen within the first half of a 4-year cycle. The difference between the two is whether the 4-year cycle is left-translated or it is right-translated.

As a general rule of thumb, any price peaks that occur before the 18-month mark after a previous 4-year cycle bottom would be a clear indication of a left-translated cycle, and any that happen after would mean a right-translated cycle.

Considering the peaks can vary while the cycle lows stay fixed, we can see that the later the price peak occurs in a cycle the lesser duration the bear market will have.

The opposite is also true. Although we have not seen a left translated cycle, when it does happen the price peak will happen earlier into the cycle, and the subsequent bear market will last longer and be more severe. Price will decline for a longer duration to an inevitable low that occurs at the 4-year mark from the previous cycle low.

A left-translated cycle will occur at some point and it will catch many investors off guard, as no Bitcoin 4-year cycle has behaved in a left-translated fashion as of yet.

As stated earlier be wary of any major price movements upwards before the 18-month mark from the previous 4-year cycle low.

Large Cycles, Medium Cycles, and Small Cycles.

Bitcoin is known to move in 4-year cycle patterns, yet there are also broader as well as shorter-term cycles within the 4-year cycle.

Long-term Bitcoin could move in 16 or 20-year cycles (yet to be determined), this would mean the left-translated 4-year cycle would mark the end of the broader 16 or 20-year cycle.

Generally, a left translated cycle should happen around the 16 or 20-year mark. This could make it possible for this cycle to become left-translated.

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Short-term Bitcoin moves in 60-day cycles. These shorter cycles offer the investor valuable insight into the overall market trend as well as give us indications of a cycle peak or a cycle low.

Use 60-Day Cycles To Determine Overall Market Sentiment

When looking for a cycle peak for a 4-year cycle we can form a clear invalidation point using 60-day cycles, we can use this rule as a guide to say the Bitcoin cycle top has been made and now is a good opportunity to reduce risk.

The rule is that each subsequent 60-day cycle should have within it a higher high and a higher low than the previous 60-day cycle low. If a 60-day cycle fails to do this it tells us the uptrend is running out of steam and the next 60-day cycle may be lower.

(Note, this screenshot was taken just before the 2021 4-year cycle highs. In my opinion, the downtrend happened because of the China mining ban. The subsequent uptrend retraced back to all-time highs, so exiting when the 60-day cycle confirmed the uptrend had run out of steam would have been the right call.)

The same is true for a bear market. Each subsequent 60-day cycle high should be lower than the previous 60-day cycle high. If a 60-day cycle succeeds in beating the previous 60-day cycle high, then it can be an indication the downtrend is running out of steam.

(Note, even though there was one 60-day cycle that formed a higher low, the trend was still not broken due to the high being lower than the previous high. This shows the downtrend is still in place.

60 Day Cycles

As with 4-year cycles, 60-day cycles can also be left-translated or right-translated.

Unlike the 4-year cycle where we have not seen a left translated cycle as of yet, left translated cycles within a 60-day cycle happen frequently.

The characteristics of a 60-day cycle are also the same as they are for 4-year cycles.

Left translated means the cycle high is before the midpoint of the 60-day cycle.

Right translated means the cycle high is after the midpoint of the 60-day cycle.

Characteristics of 60-day cycles are:

• The cycle high marks whether the cycle is left or right translated.
• The cycle low marks the time taken to complete the cycle.
• Cycle low timings rarely match up exactly in 60-day lengths. A low will form around this mark, but not exactly on it.
• The later a cycle high occurs in a 60-day cycle the more bullish the sentiment is for that current cycle. This means the chances of a following 60-day cycle also being right translated are high.

The more bullish the market the greater the momentum is to the upside, as price can sustain a rally for longer. This means in a bull market right-translated cycles tend to peak later in the cycle and have a shorter downtrend.

During a bull market (the gambler stage), 60-day cycles should form higher lows with each subsequent 60-day cycle.

During a bear market (no man’s land), 60-day cycles should form lower lows with each subsequent 60-day cycle low.

When 60-day cycles fail to match these characteristics we can begin looking for a trend reversal.

As the bull market begins to ramp up 60-day cycles begin forming to be more bullish. This means subsequent right-translated cycles, as well as subsequent higher lows. This can be the superior investor’s first indication that overall market sentiment is shifting.

During stage 2 or the speculative phase 60 day cycles are more vague and harder to determine. During stages 1 and 3, they can be clear-cut and can give an investor valuable insight into price movements and thus help create an edge.

This means trading 60-day cycles should be done with caution during stage 2. The cycles may still give us an insight into the current market sentiment, but the overall sentiment of the market has still not been decided so ultimately the information is likely to result in an incorrect broader outlook.

A right-translated cycle during stage 2 may result in a following right-translated cycle but has much less chance if the overall market sentiment is still relatively bearish.

During stages 1 and 3, the overall market sentiment has made up its mind. The market is either bullish or bearish, and now we can use 60-day cycles effectively to look for price peaks and declines as well as broader 4-year cycle reversals.

60-day cycles can be used as a valuable tool to help determine when a reversal is taking place.

Other Indicators to Compliment 60-day Cycles.

This indicator list will be short and sweet. The reason they’ve been added is that they do complement 60-day cycles and so can help determine cycle lows and highs. They do not have to be used and are more effective for trading.

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RSI

The RSI can be when the price drops below the 30 mark or above the 70 mark, the market is either oversold or overbought and if this lines up with our 60-day cycle low or high it is an indication of a reversal.

Bollinger Bands

Bollinger bands as well as the 60-day cycle low or high can help to show us the points when this reversal is likely to happen. When the price reaches the extremes of the Bollinger bands the chance of a reversal is more likely.

10-Month Moving Average

Typically price will not hang out under the 10-month moving average if the bull phase continues. If the price drops below and closes below the 10-month moving average, it can indicate that the price top or bottom is in.

It is interesting to note that we’re currently sitting right on the 10-month moving average, so for this thesis to stay valid we should bounce off this point and head upwards from here.

The COVID crash I would consider to be an abnormality, as there was a wide panic at the time across all markets, and prices quickly reversed course to regain the 10-month moving average.

This screenshot was taken from the Bitcoin monthly chart, as it is the 10-month moving average we must use it on the monthly charts.