The journey to the record high in March was largely driven by the approval and launch of the spot bitcoin exchange traded funds, or ETFs, in the U.S. in January. They have attracted net inflows to date of around $14.41 billion to date, according to CCData.
ETFs allow investors to buy a product that tracks the price of bitcoin without owning the underlying cryptocurrency. Crypto proponents say this has helped to legitimize the asset class and make it easier for larger institutional investors to get involved.
The bitcoin “cycle” refers to the period of time in which the digital currency ascends to a new record high, then falls again to enter a bear market or “crypto winter.” These cycles — of which three have now completed since the launch of bitcoin — have tended to follow a similar pattern.
That has been centered around an event called the halving, during which the reward for miners is cut in half, reducing the supply of bitcoin onto the market.
Typically, halving often occurs months before bitcoin hits an all-time high for the cycle. The current cycle has been different. Bitcoin rose to its latest record high before halving due to the bullishness around the ETFs in the U.S.
With bitcoin trading within a range after the all-time high, many have questioned whether the cryptocurrency has reached the top of the current cycle.
CCData’s report, which examined historical bitcoin price movements, suggests it can. The data and research firm said historical trends have shown that the halving event has always preceded a period of price expansion that can last anywhere from 366 days to 548 days “before producing a cycle top, with each halving experiencing a longer cycle than the one prior, due to maturation of the asset class and lowered volatility.”
The last bitcoin halving took place on April 19 this year, so those historical timeframes have yet to pass.
“Moreover, we have observed a decline in trading activity on centralised exchanges for nearly two months following the halving event in previous cycles, which seems to have mirrored this cycle. This suggests that the current cycle could expand further into 2025,” CCData said.
The analysts acknowledged that the “influence of institutional participants in the industry” in the current cycle has “altered the previous trends,” adding that low trading activity is likely to take place in the third quarter — which could in turn suggest more sideways price action.
“However, the data and previous trends are strong enough to suggest that any sideways price action is temporary, and we are likely to breach the previous all-time highs once again before the end of the year,” CCData said.
The company’s report said that the upcoming launch of an Ethereum ETF in the U.S. and other similar products around the world “is destined to bring further capital, liquidity and demand to the asset class.”
CCData highlighted another key historical data point to support its thesis — it said that the price appreciation of bitcoin takes place over a short time period. For example, in the 2012 cycle, 91.4% of bitcoin’s overall price expansion from halving to the record high happened in the four months prior to the cycle peak. This share of price increase was 78.8% and 71.5% in the four months before the respective record highs of the 2016 and 2020 cycles.
“Such parabolic expansion is yet to be made in the current cycle,” CCData said.
Other commentators have highlighted how historical patterns in bitcoin have played out.
“Historically, market cycles peak 12 to 18 months after a Bitcoin Halving, which last took place in April of this year. We also haven’t seen volatility reach prior peak highs. Lastly, prior market cycle peaks coincided with a rapid succession of all time highs – upwards of 10 to 20 new highs set in a 30-day window,” Thomas Perfumo, head of strategy at cryptocurrency exchange Kraken told CNBC by email.
“We haven’t triggered any of these signals yet.”
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