A bitcoin cycle analyst has revealed a “cheat sheet” for the cryptocurrency's price based on data from an on-chain indicator.
bitcoin's 4-year cycles have followed an interesting pattern
in a new mail Over at X, cycle analyst Root has shared a bitcoin chart that breaks down the phases the cryptocurrency's price has gone through throughout the different 4-year cycles.
To separate between bullish and bearish periods, the analyst has used an on-chain indicator called “cost basis for short-term holder.” Now, what do these terms mean?
Firstly, short-term holders (STH) refer to the fickle side of the btc market that buys and sells frequently. Typically, investors who purchased in the last six months are included in this cohort.
Cost basis (also called “realized price”), the other metric of interest here, is the average price at which the entire market or a particular segment of it acquired its coins.
This means that if the spot price of the asset falls below this value, one could imagine that the average investor in the cohort would have suffered losses. Similarly, a break above the cost base suggests that holders as a whole have just returned to a state of profit.
Now, here is the chart shared by Root that breaks down the “cheat sheet” for bitcoin based on the cost of STHs:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/12/When-will-Bitcoin-reach-the-top-Cycle-Analyst-Cheat-Sheet.jpeg" alt="bitcoin Cheat Sheet” width=”1506″ height=”1462″/>
The trend in the indicator over the different btc cycles | Source: @therationalroot on X
Note that the STH cost base Z-score is used here, which is just a measure of how far the indicator value is from its mean. The “bull market” occurs with green values of the metric, while the “bear market” occurs with red values.
Interestingly, it seems that, aside from the cryptocurrency's first few years of existence, the peaks of bull markets and the bottoms of bear markets have occurred quite close to each other.
The spikes, represented by the green dots, occurred during the “euphoria,” the market phase in which STH's cost base rises substantially above average. Such an increase in the metric suggests that these investors have been engaging in a lot of buying at the high price levels of the bull market.
Similarly, the lows (the red dots) have occurred during the capitulation phase, where STHs sell their coins at huge losses, which are quickly picked up by more determined hands at the low bear market prices, thus considerably pushing the cost base below the mean.
From the chart you can see that bitcoin is currently within the “disbelief” phase, where investors are not yet ready to believe that the current rally has any hope of continuing for long.
If the pattern followed in the previous cycles can be followed, there is still some time before the btc bull run begins properly for the current cycle, the top of which could form sometime in 2025.
btc Price
bitcoin has now recovered above the $44,000 mark after seeing an increase of almost 3% in the last 24 hours.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/dJbc66JK/" alt="bitcoin price chart” width=”1534″ height=”870″/>
btc appears to have enjoyed an uptrend during the last couple of days | Source: BTCUSD on TradingView
Featured image from iStock.com, TradingView.com charts, BitcoinStrategyPlatform.com
