Bitcoin Decade-Old Cycle Indicates Bear Market Territory: A Sequence Of 5 Events To Expect (Downgrade)

Summary A bearish development is potentially set in motion by the confirmed head-and-shoulders pattern. Bitcoin has crossed its minimum 1-year bull market mark (maximum 1.5 years) and is closely tracking its 2021 bear market setup in both price action and timing. The negative real GDP growth in the US adds another layer of bearishness that an improvement in sentiment alone can’t be easily offset. We expect a very particular sequence of five events to occur in the bear market, which results in these key levels for high-probability trades: $88,000, $55,000, $33,000, and $16,500. Our current action plan is to liquidate our Bitcoin portfolio in its entirety over the next few months. Introduction Due to our busy schedule, it has been a while since we last published our work. Even then, we felt the need to disseminate our findings due to the potentially massive implications of Bitcoin’s current price action development. At the worst-case scenario (which is also the expected scenario based on Bitcoin’s past 3 bear markets, which we’ll discuss later), it could destroy over 80% of Bitcoin’s market cap over the next year, as in the past. Just as we’ve fully offloaded all positions in Bitcoin Mining Companies back in November 2024 , we’re also looking to liquidate our Bitcoin portfolio over the coming months. Looking back, this decision proves wise as the spread (return) between Bitcoin and Bitcoin miners continues to widen. Since Bitcoin miners are more volatile than Bitcoin, past data shows miners are expected to suffer worse drawdowns during a Bitcoin bear market. Data by YCharts Therefore, this article presents key indicators one must track to keep risk exposure in check. Just as we’ve looked at key indicators (the Coppock Curve and the 6-week window) to successfully trade the $70,000 breakout back in September 2024, we’re also looking at several key indicators to reduce noise and increase clarity and confidence in our trading decisions. A bearish development is potentially set in motion by the confirmed head-and-shoulders pattern. In January 2025, we provided our 2025 Bitcoin outlook, calling for cautious Bitcoin bullishness when we identified the then-still-emerging Head-and-Shoulders reversal pattern. The support for this call is strong. Consider the following findings: Since its inception in 2009, Bitcoin has experienced three bear markets: 2013, 2017, and 2021 (Fig. 1: Areas marked in red). Each of Bitcoin’s bear markets is first triggered by a bearish reversal pattern near the channel’s upper bound, exactly 1 to 1.5 years after the halving event (Fig. 1). In 2013, a double top marked the beginning of the 1-year bear market (Fig. 2). In 2017, a head-and-shoulders marked the beginning of the 1-year bear market (Fig. 3). In 2021, both head-and-shoulders and double tops triggered a bear market that lasted 50% longer (1.5 years) than in the past (Fig. 4). Fig 1. Bitcoin’s Majestic Decade-old Cycle Since 2012 (Author) Fig 2. A Head and Shoulders Pattern marked the beginning of Bitcoin’s 2013 Bear Market. (Author) Fig 3. A Double Top marked the beginning of Bitcoin’s 2017 Bear Market (Author) Fig 4. A double reversal pattern (Head-and-shoulders and Double Top) marked the beginning of a 1.5-year bear market in 2021. (Author) The risk of the emerging Head-and-Shoulders reversal pattern was 2-fold. Firstly, Bitcoin risked following through the reversal pattern and reversing back to $75,000 . Although Bitcoin did follow through and reached $75,000 (Fig. 5), it avoided a technical bear market by rebounding to $95,000 at the time of writing. However, this price action has significantly affected our bullish $200,000 Bitcoin ambition , which may have already set the bear market in motion. In the short term, the emerging bearish reversal pattern could see Bitcoin retracing back to $75,000, but the 3-year outlook will turn bearish if it breaks below $74,000. Secondly, Bitcoin has completed its minimum one-year bull market, during which it faced minimal resistance on the way up. Reasonable expectations are between now and October 2025, suggesting that headwinds will gradually increase until it officially enters the bear market phase of the current halving cycle. Our thesis suggests minimal Bitcoin headwind until April 2025, then gradual downward pressure through October 2025 before entering a bear market. Fig 5. Bitcoin’s 2025 Head-and-shoulders reversal could potentially already mark the start of a bear market when compared to Bitcoin’s 2021 bear market setup. (Author) In addition, we have now identified two new risks that are even more likely to trigger a Bitcoin bear market. The first newly identified risk is the resemblance of the current Bitcoin price action and Bitcoin’s price action before the 2021 bear market. By referring to Fig. 6, we can see Bitcoin is tracking the bearish setup of its previous bear market: The same head-and-shoulders pattern occurred with the exact timing (1 year after the halving event) The same pattern of head and shoulders also occurred around the same resistance level. The reversal patterns were valid, and the price reversed, followed by a rebound higher. Following this narrative, we could see Bitcoin topping in July (or after 1.25 years from April 2024). This aligns with past cycles where a Bitcoin bull run typically lasts between 1 year (current minimum) and 1.5 years (current maximum). The second newly identified risk is a fundamental one. Although the Trump Administration was generally viewed as a bullish catalyst for Bitcoin (e.g., the Bitcoin Reserve and the public support for Bitcoin ), the US real gross domestic product (GDP) growth rate, which IMHO trumps almost other forms of fundamental and economic indicators, came in bearish at negative 0.3% on a QoQ on an annual basis. Fig 6. The resemblance of 2025 Setup to the 2021 Bear Market Setup (Author) The Sequence of 5 Events We Expect to Unfold So, what should we expect if a bear market occurs? The sequence of 5 events we expect to unfold is as follows: Another reversal pattern near the current ATH. A 50% decline from the latest ATH. A dead cat bounce to reach 20% from the latest ATH Another decline to 70% away from the ATH. Bottoming out at 80%-85% away from the ATH. Tentatively, the resulting key levels are: ATH = $110,000 50% key level = $55,000 A dead cat bounce resistance = $88,000 30% key level (70% away from the ATH)= $33,000 Ultimately bottom = $16,500 The key levels represent the visible price range where Bitcoin is expected to bounce off, thus it’ll be strategic to trade Bitcoin (e.g., dollar cost averaging) at these levels. This sequence of events is evident from Bitcoin’s past three bear markets (Fig. 2, Fig. 3, Fig. 4) and is transparently documented throughout our Bitcoin coverage on Seeking Alpha. Furthermore, this is not a hindsight analysis. We first published the initial version back in May 2021, right at the peak of the 2020 bull run, and have since seen four (almost five) of the five events come to pass. Reversal pattern -> Double Top [ ✓ Nov 2021] 50% decline from peak -> Reach $34k [ ✓ Jan 2022] Rebound back to 20% from peak -> Reach $54k (Missed by 10%) [ ✓ September 2021] Another decline to 70% from peak -> Reach $21k[ ✓ June 2022] Bottom out at 85% from peak -> Reach $10.5k (missed by 5% – $15k) [ ✓ 10 November 2022] Since this model has helped us successfully navigate the Bitcoin market over the past four years, we’ll continue to uphold it with credibility. That being said, there are always some differences in nuances over each cycle, which adds some level of uncertainty when investing in Bitcoin. The nuance of the current cycle is that Bitcoin might’ve invalidated the decade-old cycle by breaking above the $90,000 resistance level (the upper bound of the channel illustrated in Fig. 1). Although so, we believe this model can still hold given how Bitcoin is tracking its 2021 bear market setup. Conclusion Thanks to Bitcoin’s success and several outstanding trades (such as our Bitfarms ( BITF ) play and CleanSpark ( CLSK ) play , our crypto portfolio now represents more than half of our total portfolio. Based on the findings presented in this article, we couldn’t help but be very anxious about Bitcoin when we began to weigh its risk and potential. The last thing we want to see is our portfolio—the portfolio we’ve painstakingly accumulated since 2021, when prices were below $30,000—get wiped out in a Bitcoin bear market. We’re following through on our suggested course of action back in May 2021 to dollar cost average into Bitcoin at three critical support levels, $30k, $20k, and $10k. Sometimes, it’s wise to take all the chips off the table. That’s why we’re also looking to liquidate our Bitcoin portfolio over the coming months.

Source: Seeking Alpha