Crypto Cycles: Unveiling Patterns & Projections

A recent research report published by Delphi Digital, a renowned analytics firm, illustrates the consistent and predictable nature of price movements and trends within the cryptocurrency market. The report deeply explores the interplay between the four-year Bitcoin (BTC) market cycles and broader economic trends.

According to analysts at Delphi Digital, the current consolidation phase around the $30,000 mark bears resemblance to the period between 2015 and 2017. The indicators point toward a potential all-time high (ATH) for Bitcoin sometime in the fourth quarter of 2024.

Impact of Economic Cycles on Bitcoin Performance

Delphi's analysis highlights the cyclical characteristics inherent to the cryptocurrency market. This cyclical pattern is demonstrated by the timing of peaks to troughs, the duration of recovery periods to previous cycle highs, and the timing of price surges to new cycle peaks. Using Bitcoin as a reference point, Delphi outlines the general blueprint of a typical cryptocurrency market cycle.

Bitcoin's USD price (logarithmic scale) depicting its four-year cycles. Data source: Delphi Digital

These four-year cycles typically involve Bitcoin reaching a new ATH, followed by an approximately 80% decline, a bottoming out roughly a year later, a two-year period of recovery to previous highs, and finally, a year-long price rally culminating in a new all-time high.

The research unveils a compelling correlation between Bitcoin price peaks and shifts in the business cycle, as indicated by the ISM Manufacturing Index. 

Comparison of Bitcoin/USD year-over-year performance (orange) with U.S. ISM Manufacturing Index year-over-year trends (white). Data source: Delphi Digital

During Bitcoin's price peaks, the ISM index often exhibits signs of reaching its peak, while metrics like active addresses, transaction volumes, and fees also reach their zenith. Conversely, network activity levels tend to recover as the business cycle indicates an upswing.

The report underscores the role of Bitcoin halvings in shaping these cycles. The past two halvings occurred around 18 months after Bitcoin's bottoming out and roughly seven months prior to a new ATH. This historical pattern suggests a projected new ATH for Bitcoin around the fourth quarter of 2024, aligning with the anticipated timing of the next halving event.

Similarities to the 2015-2017 Pre-Bull Run Phase

The report also posits that the current market environment shares striking similarities with the period between 2015 and 2017. The convergence of market behavior, economic indicators, and historical trends indicates that the current phase mirrors a time of elevated risk exposure and potential growth, reminiscent of the earlier period.

The report highlights the similarity in trading patterns, particularly in the S&P 500, to the trajectory observed during 2015-2017. These patterns persist even during uncertain times, such as an earnings recession, reflecting the sentiment of that earlier era.

The consistent pattern of Bitcoin's cycle, its synchronization with broader economic shifts, and the upcoming 2024 halving collectively contribute to this analysis.

Present U.S. ISM Manufacturing Index (orange) contrasted with the 2013-2019 cycle (white). Data source: Delphi Digital

Delphi draws parallels between the global growth outlook during 2015-2016 and the recent period of economic uncertainty in 2021-2022. Factors like the strength of the U.S. dollar and changes in global liquidity cycles mirror historical trends.

The report underscores the resemblance of gold's performance during that period, influenced by concerns of currency debasement, to the present situation. These parallels strengthen the argument that macroeconomic conditions are following a familiar trajectory.

Current gold price in USD (log scale) compared to the 2015-2019 cycle (white). Data source: Delphi Digital

The Crypto Market Outlook: Optimism with Cautions

Delphi's analysis presents compelling evidence that the crypto market operates within cyclical patterns that mirror broader economic changes. The report's prediction of a new ATH by the fourth quarter of 2024 aligns with historical halving patterns. This timing, combined with indicators like the ISM and expectations of renewed liquidity cycles, bolsters the case for a cycle akin to the one observed during 2015-2017.

The forthcoming Bitcoin halving in 2024 further supports the firm's anticipation of a potential bull market by that time. While the analysis acknowledges inherent risks and uncertainties, the overall outlook for the cryptocurrency market in the next 12-18 months appears promising due to the accumulation of catalysts and historical precedent.