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Hey DEFI TIMES community,
The coming year will be the year of Bitcoin. It seems like we are on the brink of another crypto bull cycle. Institutional investors are rushing to buy Bitcoin. They just started buying ETH to diversify their assets in the crypto space.
We have seen these cycles over and over again. The last one peaked in December 2017, after which we saw a horrifying bear market. As we enter the next bull cycle, many people ask themselves when they should sell their crypto assets. In other words: when will Bitcoin peak in this bull market?
Today, I would like to introduce three different scenarios when Bitcoin is likely to peak in this market cycle.
First of all, you need to understand that it is tough to time the market. So never try to sell at the very top of the bull market. If you do that, you will most likely not succeed. Most people lose money trying to time the market.
It’s way better to consider yourself being wrong. When Bitcoin pumps, take profits but don’t sell everything. In that case, you sold some coins if the bubble pops, but you continue to ride the wave in case the bubble continues.
With that said, let’s dive into the three different scenarios.
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Four-year market cycle
The four-year market cycle scenario is based on the Bitcoin halving. Every four years, the Bitcoin block reward is cut in half, which leads to a lower emission schedule and inflation of the Bitcoin network.
Another basis for this scenario is that current prices do not reflect future halvings. Low inflation rates combined with stable demand lead to higher prices. Rising prices attract newcomers, and a new cycle begins, ending in a parabolic bubble. People get excited; they tell their friends about Bitcoin. Network effects evolve, new money is flowing in, which leads to even more capital entering the industry.
This cycle repeats every four years, as the Bitcoin halving also takes place accordingly. If this scenario holds, we could see a possible price peak of Bitcoin in December 2021. For the record, Bitcoin’s last all-time high was in December 2017.
Lengthening market cycles
Some people claim that crypto cycles tend to become longer as the crypto market matures. The crypto market cycles adjust to stock market cycles, which usually take around 7-10 years.
The main reasoning is the following: the more significant the crypto market becomes, the more money is flowing in, which leads to institutional investors entering the market. Institutional investors are not traders and therefore invest with a long time horizon.
That’s how the crypto markets could stabilize. The last bubble burst because of fearful retail investors who put vast amounts of money into fundamentally flawed projects. This time could be different. Vast amounts of money could flow into solid projects. Price increases could become more sustainable.
According to this theory, Bitcoin could peak in 2022 or even later. I am not a proponent of this theory because crypto markets still move too fast. Also, many problems are still unsolved, such as scalability or interoperability. The bubble could burst quicker due to these problems, and I don’t see the crypto markets getting along with them for such a long time.
Shorter market cycles
Now let’s get to a brand new theory that was developed a couple of months ago. Some people believe this market cycle is going to be shorter than the last one. They believe information is spreading faster than ever. Digitalization is the leading accelerator.
As information spreads faster, cycles become shorter because people will hear about Bitcoin way quicker. We communicate faster, process information faster, react faster, and so on. This process only accelerates over time. Have you caught yourself watching a YouTube video on twice the speed lately?
That’s how the bull run could be shortened. How long did DeFi summer last?
According to this scenario, Bitcoin could peak as early as July 2021.
I believe that this scenario is not very likely. Information is spreading faster, but does it have an impact on market cycles? There’s no evidence for that.
Additionally, this bull run is led by institutions buying Bitcoin. Instutionans typically take a lot of time to research new investments before they put their money at risk.
I could imagine a shorter market cycle if retail investors drove the bull market.
No one knows precisely how long this bull market is going to last. All in all, I believe the most likely scenario is the four-year cycle, which would peak in December 2021.
I could also imagine a less likely future where Bitcoin peaks in 2022. Institutional investors are long-term thinkers, and most do not try to time or trade the market. It’s reasonable to assume that most of them won’t sell their entire Bitcoin positions, even when the price hits $200,000.
Now, let us know what you think! Are we in another parabolic bull market? What’s your price target, and when will Bitcoin peak?
All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.