Will We See a Crypto Winter? Is it Already Here? Or Will The Bitcoin Bull Awaken?

I remember it like it was yesterday. The LONG months and years waiting for Bitcoin and the rest of the altcoins to begin the next bull market. The longer it went on, the more the eagerness for the next bull market grew. 2018 was pretty bad, but some of the euphoria of 2017 still lingered. Several decent pumps reignited the hope that this was the start of something bigger. Each time, though, the hopes and dreams of crypto enthusiasts were smashed. Especially late in 2018 when Bitcoin dropped over 50% to the ultimate bear market low.

Then 2019 came, and the crypto market seemed to wake up. The first half looked very bullish, with Bitcoin making a nice push higher from about $3500 to almost $14k. Only to see the last half of 2019 give back over half of those gains. The bull returned to the crypto market for the first 45 days of 2020 when it looked like Bitcoin might once again try to make a serious move higher.

But then the bottom fell out with the rest of the financial markets when the pandemic hit. Bitcoin dropped almost 65% from the February highs including a drop of over 50% over two days in March. What at the time seemed like the end of the world as we knew it turned out to be the buying opportunity of the century. Obviously, it wasn't straight up from there but Bitcoin did gain nearly 200% over the next six months. Then October hit and it was off to the races with Bitcoin seeming to be unstoppable.

Of course, we now know that wasn't true. Bitcoin did have a nice run setting a new all-time high in April ($64,854 Binance), then again on November 10th ($69,000 Binance). It now appears that the high set on November 10th was the peak for the last market cycle. In the chart below you can see that the only time the Stoch RSI has dropped below the 20 level has been after a cycle peak. And you can see that the Stoch RSI has also dropped below for this cycle.

So now where does the crypto market go from here? How deep and long will this bear market be? Could this be the end of Bitcoin following a 4-year cycle? So many questions.

       Bitcoin Monthly Chart

Is it possible that Bitcoin and the crypto market as a whole have matured enough that we could see very different market cycles? After all, this bull market turned out to be very different than past bull markets in the way it ended. Bitcoin ended up double topping instead of the parabolic blow-off tops that we have seen in the past. So far Bitcoin has pulled back a little over 50% from the peak and has stabilized around $40k. Past bear markets have experienced corrections of between 85% and 90% (see chart below).

                                        Bitcoin Weekly Chart

Will we see an additional 30% to 40% downside from here or is Bitcoin already near the bear market low? A drop of 80% to 85% from the all time high would put the price of Bitcoin near $10k. It would be the first time that the price would have dropped back below the previous bull market high. The 2017 bull market high was just under $20k so any break below that would be a first in Bitcoin's short history.

                                            Bitcoin 2-day Chart

The Bitcoin 2-day chart above shows a projection for the price if Bitcoin does stick to the 4-year cycle. You can see that the number of days from the November peak back to the 3rd halving is very similar to the past cycle. You can also see that this past market cycle did pretty closely match the last market cycle, as far as timing. That is of course if the peak in November marked the end of the last market cycle.

No one really knows where the price of Bitcoin is going to go in the short to medium term. But, we do know that over the last couple of years the crypto market has broadened its base. Rather than simply a speculative trading market, it is now a multifaceted market. There is now DeFi where you can stake, loan, and yield farm, you now have a rapidly expanding NFT market, and a rapidly expanding Blockchain Play-to-earn Gaming market.

Then on top of that, you have the rapidly evolving investor base with institutional investor numbers rising. There are also an ever-growing number of major corporations and legacy financial institutions jumping into the crypto space. Coinbase Global, Inc. (COIN) just recently teamed up with Mastercard to allow customers to purchase NFTs on the new Coinbase NFT marketplace.

What this means is that during a future bear market there will be so much more going on than in past bear markets. These new market segments will act to draw in new retail investors. They also should act to create a floor for the price of Bitcoin. My personal feeling is short of a black swan event, the price of Bitcoin will not break below the 2017 high. I would put a floor somewhere in the mid $20k level. Obviously, this is just my opinion and I could be wrong.

Regardless of where Bitcoin goes from here, I remain extremely bullish long-term. Many questions remain, will we have to wait until after the next halving for the next bull market to begin? Or, has the changing crypto landscape affected the market cycle enough that we could see a bull market sooner? Other than a black swan event the next high-level risk is probably the US government over-regulating crypto.

My fear is that we may see regulations enacted that the government will claim are for the protection of crypto investors. I am not against some regulation, but I am against regulations that are enacted simply to solidify the government's control over its citizens. And also regulations that do nothing more than protect the traditional banking system while hurting crypto investors.