Most people who are interested in crypto are probably familiar with the idea of a 4-year cycle based on Bitcoin’s halving dates. You’ve probably also heard (especially recently) about the lengthening cycles. But are you familiar with the concept of microcycles replacing 4-year cycles? I heard about it recently and thought it was really interesting… especially as it can have a pretty significant impact on how to trade crypto in 2022.
This pattern is commonly known in the crypto space. Approximately every 4 years (or more specifically – after 210,000 blocks are mined) the amount of Bitcoin awarded to the miners drops by 50%. This makes Bitcoin scarcer and therefore more valuable. In the past, Bitcoin reached its market cycle peak approximately 12-18 months after the halving, then crashed and then started picking up value in anticipation for the next halving.
Some people assume that 4-year cycles are timed almost perfectly like a clock, hence why a lot of people expected the peak of the current cycle in mid or late 2021. It didn’t happen because the cycles are actually getting longer.
If we look closer at the dates of the halvings and the market cycle peaks and bottoms, we can observe that each cycle is actually getting longer and the ‘4 year cycle’ is only a very loose timeframe.
The first halving occurred on 28th November 2012 and the market cycle peak was on 29th November 2013.
The second halving took place on 9th July 2016 and the market cycle peak was on 17th December 2017.
The third halving was on 11th May 2020 and although Bitcoin reached an ATH in early November 2021, it is widely expected that this market cycle is nowhere near over.
In other words – it took Bitcoin almost exactly 12 months from the first halving to hit market cycle peak but this timeframe grew to over 17 months during the second cycle.
Based on this data, we could speculate that it will take over 22 months from the halving to reach the peak of the current cycle, which would put it at the end of March 2022.
Of course, this is only one way of measuring the length of market cycles and there’s also a strong argument that the cycles will keep extending by longer periods of time, rather than a fixed period of approximately 5 months (difference between the first and the second cycle). This leads to the speculation that the peak of the current market cycle is most likely to occur at some point between mid-2022 and early 2023.
The chart below (credit goes to Benjamin Cowen – Into the Cryptoverse) is a great illustration of lengthening cycles. Please note that this chart shows ROI on a logarithmic scale.
This leads me to the idea of microcycles. Of course, each market cycle contains some smaller cycles within itself but as the cycles are getting longer, there seems to be a pattern emerging in the current cycle.
The 2017 market cycle (chart below) had a very sharp, parabolic rise to the top, followed by some very sharp peaks and V-shaped recoveries.
Now compare it to the current market cycle. After the initial parabolic run-up in late 2020/early 2021 we had a couple of much more rounded peaks followed by long re-accumulation phases, rather than V-shaped recoveries. We can distinguish one such cycle in spring-summer 2021 and we are now towards the end of the second one.
Based on this observation, we can speculate that the current re-accumulation phase will finish at some point in January or February and it will be followed by a parabolic rise to a new all-time high and another rounded top. It is likely that 100k may be the next strong resistance level, so here’s my (very dubious) speculation how 2022 may look like for Bitcoin:
Then the pattern may repeat once again in the second half of the year or we may have a parabolic run-up and a blow-off top once retail FOMO kicks in above 100k.
This is of course just speculation but I think it has some merit. While I’m not keen on swing trading Bitcoin during the cycle, I’m planning to use this pattern to trade lower cap altcoins.
I missed the boat in spring 2021, because (like the majority of the crypto space) I didn’t expect that crash from 65k down to 30k. But I learned my lesson and I took a lot of profits out from gaming alts in November and early December and I’m now re-investing (mainly in gaming and metaverse alts) in anticipation of the next bull run.
If you found this article interesting, please check out my YouTube channel – I post market commentaries, my thoughts about various altcoins and NFTs, and tutorials for beginners and more advanced users. I also mention a lot of altcoins and NFTs on my Twitter.
The content covered in this article is NOT to be considered investment advice. I’m NOT a financial adviser. These are only my own speculative opinions, ideas and theories. Do NOT trade or invest based purely upon the information presented in this article.