The cryptocurrency community is up in arms about various recent developments they blame for Bitcoin’s dramatic drop in price, such as China’s alleged mining ban and Tesla halting crypto payments. However, some analysts believe Bitcoin might just be doing exactly what it’s supposed to be doing, following historical patterns defined by the algorithmically encoded halving events.
When markets experience a downturn, it’s natural for investors to look for reasons to explain the drop and guide their trading decisions. The reality is, no matter when Bitcoin crashes, there will always be some negative news to blame it on. When Bitcoin is doing well, the negative news is largely ignored but when things go sour, suddenly the “FUD” is front-page news.
Admittedly, the current downturn appears to have come a bit early but it shouldn’t have been unexpected. Previous market cycles show that the rate at which grow cycles top out is reducing, indicating a potential 30% reduction every cycle. With this figure in mind, the halving event on May 11 last year instigated a growth cycle with only a 12-month life cycle, rather than the 18 months that followed the 2016 halving. On the other hand, this may just be a mid-way dip as experienced in previous cycles.
So where to from here?
Although the current 40% drop in price appears to confirm an end to the year-long bull market, some investors remain bullish. Bitcoin is still up 285% over the past 12 months, so investors who bought in at the last halving event remain in profit. More so, even if this is a trend reversal, it’s likely to only be a mild correction with a strong recovery.
Popular ‘Crypto Twitter’ voice Dave the Wave (@davthewave) presents compelling evidence in this regard and was one of the first analysts to pre-empt the recent crash. In fact, he puts into question the concept of a cycle theory altogether, considering the fact that Bitcoin has only experienced two previous cycles and therefore lacks conclusive evidence to back the theory.
However, halving events are coded into the algorithm and their impact cannot be understated. The likelihood of a strong recovery here is low, signaling a possible drop to $25,000 late this year before the bull market resumes. From there, a path to $140,000 in 2023 is on the charts, should BTC remain in its decade-long growth cycle.