• Bitcoin’s price movements have historically followed a four-year cycle, influenced by halving events that reduce the supply of new Bitcoin by 50% every four years. This cycle includes phases of breakout, hype, correction, and accumulation.
• The current cycle, which began in November 2022, is in an intermediate stage, with indicators suggesting the bull market could extend into 2025. However, Bitcoin’s maturation and broader adoption may diminish its cyclical nature.
• Analysts monitor blockchain-based indicators such as the MVRV Ratio (currently at 2.6), the percentage of Bitcoin’s free float supply transacted on-chain (currently at 54%), and the MCTC Ratio (currently at 6) to gauge the market’s potential for growth.
• Bitcoin’s dominance in the crypto market is declining, signaling a potential shift towards altcoins. Funding rates for perpetual futures contracts for altcoins indicate speculative interest but not yet at previous peak levels.
• The approval of spot Bitcoin and Ether ETPs in the U.S. has brought significant capital inflows, while regulatory clarity from the U.S. Congress and macroeconomic conditions will continue to influence the crypto market’s trajectory.

As Bitcoin continues its volatile journey, analysts are closely watching whether the cryptocurrency’s current bull market will follow historical patterns or break free from its cyclical past. With Bitcoin hitting a record high of $108,309 in December 2024 before retreating, the question on investors’ minds is whether the rally has more room to run or if a peak is imminent.

The four-year cycle: A historical framework

Historically, Bitcoin’s price movements have followed a four-year cycle, driven largely by its halving events, which reduce the supply of new Bitcoin by 50% approximately every four years. These cycles typically include phases of breakout, hype, correction and accumulation. According to Grayscale Research, the current cycle, which began in November 2022, is in an intermediate stage, with indicators suggesting the bull market could extend into 2025.

However, as Bitcoin matures and gains broader adoption, some analysts argue that the cyclical nature of its price movements may diminish. The introduction of spot Bitcoin and Ether exchange-traded products (ETPs) in the U.S. has brought institutional investors into the fold, while regulatory clarity from the incoming U.S. Congress could further stabilize the market.

“As long as the asset class is still supported by fundamentals – like application adoption and broader macro market conditions – the bull market can potentially extend into 2025 and beyond,” Grayscale Research noted.

Key indicators to watch

To gauge the maturity of the current cycle, analysts rely on a variety of blockchain-based indicators. One such metric is the MVRV Ratio, which compares Bitcoin’s market value to its realized value (the price at which coins last transacted on-chain). Historically, the MVRV Ratio has peaked at a value of at least 4 during each cycle. Currently, it stands at 2.6, suggesting the market may still have room to grow.

Another critical indicator is the level of new money entering the Bitcoin ecosystem. Grayscale Research tracks the percentage of Bitcoin’s free float supply that has been transacted on-chain in the past year. During previous cycles, this figure reached at least 60% before prices peaked. Currently, it stands at 54%, indicating that more capital could flow into Bitcoin before the cycle concludes.

Miners, who secure the Bitcoin network, also provide valuable insights. The MCTC Ratio, which measures the value of Bitcoin held by miners relative to their cumulative revenue, has historically peaked at 10 before prices topped out. Currently, the ratio is at 6, reinforcing the view that the market is in an intermediate stage.

Beyond Bitcoin: The broader crypto market

While Bitcoin remains the dominant force in the crypto market, signals from other assets, such as Ethereum and altcoins, are also worth monitoring. Bitcoin’s share of the total crypto market capitalization, known as Bitcoin dominance, has recently begun to decline, a pattern observed around the two-year mark of previous bull markets.

“If this continues, investors should consider focusing on a broader range of measures for determining whether crypto valuations are approaching cyclical highs,” Grayscale Research advised.

Funding rates for perpetual futures contracts, which reflect the cost of holding leveraged positions, also provide clues about market sentiment. Currently, funding rates for altcoins are moderately positive, suggesting speculative interest but not yet at levels seen during previous market peaks.

Regulatory and macroeconomic factors

The crypto market’s trajectory is increasingly influenced by regulatory developments and macroeconomic conditions. The approval of spot Bitcoin and Ether ETPs in the U.S. has already brought $36.7 billion in net capital inflows, according to Bloomberg and Grayscale Investments. Meanwhile, the recent U.S. election is expected to bring greater regulatory clarity, potentially solidifying crypto’s place in the global financial system.

However, challenges remain. The Federal Reserve’s recent signals of fewer interest-rate cuts in 2025 have weighed on both stocks and crypto, highlighting the market’s sensitivity to macroeconomic shifts.

Looking ahead

While historical patterns suggest Bitcoin could reach a cycle peak in mid-January 2025, analysts caution that past performance is not always indicative of future results. As the crypto market evolves, traditional indicators may lose their predictive power.

“Bitcoin and many other crypto assets can be considered digital commodities, and like other commodities, they will likely show a certain degree of price momentum,” Grayscale Research concluded. “But as long as fundamentals remain supportive, the bull market could continue well into 2025.”

For investors, the key will be balancing optimism with caution, using on-chain data and market indicators to navigate the ever-changing crypto landscape.

Sources include:

GrayScale.com

MarketWatch.com

Security.org