Michaël van de Poppe - 13 November 2021

Bitcoin market during a bull cycle, what’s next?

The Bitcoin and crypto markets are in the middle of a giant bull cycle, as the total crypto market capitalization has grown from $125 billion in March 2020 to a peak high of $3 trillion in the past week.

That’s an overall increase of more than 2,000% in a timeframe of twenty months.

However, because such an increase has taken place, the question becomes whether the market will top out in the coming months, topping out right now or whether the market is going to be in a full-blown super cycle. The primary question is whether Plan B’s stock-to-flow model will indicate a top during Q4 2021, which leads to a 4-year cycle once again, or whether the market will be wrong, in which a longer cycle (the lengthening cycle) will be taking place.

The chart could show some information on this perspective.

The weekly chart of Bitcoin against USDT

TradingView Chart

The weekly chart itself doesn’t shout a full-blown impulse wave is around the corner, as the market is showing weakness in the recent breakout of the all-time high. Everyone has seen the movements in the markets, which aren’t the bullish ones we’d want to see—corrections taking place after every attempt of a new all-time high to be created. 

Those breakouts resulted in a correction and the strange weekly chart we’re currently seeing. From my personal view, the market isn’t looking bullish if the weekly candle closes like this.

Crucial would be the fact that the markets will hold above the previous all-time high of May as that’s the indication of the upper bound of the range. If the markets drop beneath that level, as marked in the chart, a heavier correction is around the corner. Then I’d be projecting levels at $51-52K and $44-48K as the following essential interest levels.

Such a corrective move and breakdown (I’m not saying we will, but everyone should remain realistic) will put pressure on the outlook of the stock-to-flow model. As the markets’ behavior is based on emotions, a delay in the stock-to-flow model or a failure of that one passing through would indicate weakness of the markets. I’m sure it would result in people deciding to close their positions as they base their investments solely on that model.

In that case, the expectations of every one of a massive full-blown quarter to be taking place will not be happening. Rarely, when everyone expects one thing to take place, it takes place. Mostly the opposite will happen. And I can say that once the markets break south, everyone will heavily be confused with what we’re going to see afterward with the needs. 

That’s part of the game. Markets are surprising and make strange movements left and right. Everyone is heavily focused on the 4-year cycle. At the same time, the impact of the halving will decrease over time, while the effects of macroeconomics will increase over time due to the growth of the cryptocurrency markets. 

I think we’re at that stage right now, resulting in the supercycle and a more extended wave rather than a 4-year cycle at this point. 

Indicators are not showing that the market is in euphoria

If any assumption is made on the cycle length or the current stage of the cycle, on-chain analytics are added. Those on-chain analytics aren’t saying the market is topping out here. 

In that case, I’d be looking at the Puell Multiple indicator for any indication. At this point, it’s showing that we’re in the middle of any cycle. Second, the MVRV Ratio (Market Value to Realized Value) also offers a case where the market isn’t overheated (shown with those peak numbers on the orange lines) but just in the middle of the bull cycle.

What does that say to us? 

It says that we’re not seeing the type of euphoria that’s common to us at peak highs, which were seen in the bull run of 2017 and the recent run in May 2021. Yes, the market grows, and it is growing fast (to be honest; this is the decade of crypto overall), but it’s not accelerating as we know from any parabolic advancement. 

Parabolic advancement is going to happen at some point in time. Still, I’d prefer to refer to the current phase to anything related in late 2016, beginning 2017 with just consolidations after consolidations and slow growth upwards, constant corrections taking place before a parabolic can continue happening.

Reminder; the market can remain irrational longer than you can stay solvent. This works both ways. Never expect one thing to be happening for sure. The market can adjust and change every time you think you’re convinced that the market is making such a movement. 

Long-term holders are still in positions; peak high isn’t there.

If you make any analysis on the markets, then keeping it simple is relatively significant. The moment the long-term holders are starting to sell their positions, it’s time to consider the same.

This chart from Glassnode shows the impact of that supply on the markets. The long-term holders have been selling off (most great movements were seen in 2017 and the recent run in May), which were heavy indications of a potential peak high to be taking place in the coming weeks/months.

Now, times are different. Yes, the long-term holders are selling a tiny bit, so we’re getting in a potential period of acceleration and bull-run to be taking place (comparable to the beginning of 2017), but it’s nowhere near a possible peak high at this point. 

Daily chart for Bitcoin

TradingView Chart

The daily chart is straightforward to watch, and the indicators and price action can’t be denied. It’s not the best outlook and is another case of weak breakouts above the recent all-time high. 

Such a weak breakout can be classified as a fake-out above the recent high as the price is correcting back, back in the range it used to be in.

Based on the daily timeframe, a potential rising wedge structure is seen in which a bearish divergence is taking the spotlight. Not confirmed yet. That would be authorized once the market breaks beneath $60K (crucial support zone). 

If that happens, the first real test will take around $54K, based on the daily timeframe, but we’ve also managed to see the levels around $51K and $44-48K.

On the other hand, the bullish manner, a breakout above $66.7K, would indicate strength and might tell a new all-time high is around the corner. Such a breakout could lead towards $72-75K. 

Therefore, the market is bearish beneath $66.7K and, personally, bullish once the market breaks above. 

In conclusion, the market will probably face a lengthening cycle, which is healthy for everyone involved. The purpose of Bitcoin is to become sound money over time, through which you don’t need to rush into any trading activity for short-term purposes. Lengthening cycles is a path towards this goal and towards achieving a proper mature market. 

See you next week!