Has the Bitcoin Price Cycle Been Broken?

The Bitcoin halving is a significant event in its price cycle. Every four years, the rewards miners receive for adding a block to the blockchain are cut in half. Historically, the halving has played a key role in Bitcoin’s multi-year price seasonality.

Traditionally, the halving signals the start of a positive “crypto summer.” In 2024, the most recent halving occurred on April 19, reducing the block reward to 3.125 BTC per block. Crypto summers are characterized by rising prices and new all-time highs (ATHs). Currently, the Bitcoin price stands at $56,500, which is about 14% lower than at the time of the halving.

Bitcoin Price Cycles

To illustrate Bitcoin’s price cycle, we’ve updated a chart first introduced a few months ago in another publication. This chart tracks the price movement in relation to the losses incurred around the halving.

The drawdown is a statistic that measures the percentage price decrease from the last ATH. A 0% observation means the price is at the ATH, while a -60% observation indicates a 60% drop from the previous ATH. The light blue line shows that Bitcoin has fallen by 19.5%, as the price is 19.5% below the last ATH, and we are currently 114 days after the halving. While each halving cycle is unique, there are notable similarities. The purple line, representing the average of the first three halving cycles, hints at a typical seasonality around the halving.

The Four Seasons of Bitcoin

Between 750 and 400 days before the halving, Bitcoin typically enters a “crypto winter,” characterized by significant price declines and deeper drawdowns from the previous ATH. Roughly 400 days before the halving, the crypto winter ends when the market hits its low, with an average drawdown of over -80%. During the 400 days leading up to the halving, prices recover by about half of the losses, marking the “crypto spring.” Interestingly, prices in the current cycle have rebounded more robustly than the historical average.

Post-halving, for up to 350 days, prices continue to rise, reaching new ATHs. During this phase, referred to as the “crypto summer,” drawdowns are almost nonexistent. Between 350 and 550 days after the halving, prices enter the late summer phase, known as the “crypto autumn.” Prices remain high, with some new ATHs, though less frequently than during the summer. Finally, around 550 days after the Bitcoin halving, the cycle resets as the crypto winter begins once again.

An Unusual Summer

This particular crypto summer has been unique, following an exceptionally hot crypto spring. For the first time in history, an ATH was reached in spring, about 40 days before the halving (as indicated by the light blue line). The launch of Bitcoin spot ETFs in the U.S. in January was the driving force behind the rapid and steady rise in Bitcoin’s price. U.S. spot ETFs now manage over 900,000 Bitcoins, more than six times the amount mined this year!

On the other hand, there have also been substantial Bitcoin sell-offs, as the Mt. Gox trustee and the German government liquidated their holdings. While not all of Mt. Gox’s Bitcoins were sold for dollars, as some were transferred directly to final holders, the volume was still significant and pressured the price. These parties have reduced their Bitcoin holdings by over 120,000 Bitcoins in approximately 45 days, which equates to 280 days’ worth of mining rewards.

Finally, part of the price volatility can be attributed to the traditional financial world (“TradFi”). Recession fears, coupled with low liquidity in the summer, led to a mini-crash in Japanese stocks. The high-beta NASDAQ index also saw a sharp correction. Bitcoin, whose behavior is closely correlated with tech stocks, followed suit and dropped.

Has the Bitcoin Price Cycle Been Broken?

It’s unlikely. The Bitcoin price cycle remains largely intact. The deviations from the historical pattern can be explained by several factors, including the introduction of spot ETFs, unusual liquidation of Bitcoin holdings, and volatility driven by TradFi.

Moreover, regulatory uncertainty is easing, as evidenced by the recent introduction of the European Market in Crypto Asset (MiCA) regulations. Additionally, the number of institutions offering cryptocurrency investments to their clients continues to grow, indicating strong institutional acceptance.