Bitcoin Cycles Suggest More Downside Ahead

Bitcoin has shown significant weakness in recent months. After reaching its all-time high of USD 126,251 in October, it has declined more than 30 percent in about six weeks, placing it in a technical bear market. From the perspective of its cyclical rhythm, this correction is highly consistent with historical patterns. Based on these cycle characteristics, Bitcoin may still face considerable downside pressure over the next year.

Reviewing the three previous halving events in 2012, 2016 and 2020, Bitcoin has displayed a clear cyclical rhythm. It typically forms a cyclical peak, not necessarily the all-time high, about 526 to 552 trading days after each halving. It then enters a year long corrective phase during which the maximum drawdowns reached 74.4 percent, 83.4 percent, and 76.7 percent.

In the current cycle, the most recent halving took place on April 19, 2024. Bitcoin reached USD 126,251 on October 6, which is roughly 536 trading days after the halving. This aligns closely with the timing of previous cycle peaks. Using the post halving drawdowns from past cycles as a guide, even the smallest of the three suggests meaningful downside potential.

That said, Bitcoin’s market capitalization is now significantly larger than in earlier years, and the share of long-term investors has increased, which has helped reduce volatility. As such, the potential correction this time may not be as deep as in past cycles. Even under a more conservative assumption that uses only half of the historical average drawdown, the decline could still reach around 40 percent. This would place Bitcoin near USD 77,000 over the next year, or possibly even lower.