Finally, after nearly a year and a half, Bitcoin (BTC 1.32%) seems to have come to life. Rising more than 28% last month and falling in line with historical trends, this October treated Bitcoin particularly well yet again. In the previous 13 years, Bitcoin has increased 26% on average in October, with only four years posting a negative return.
With this resurgence, one of Bitcoin's most dedicated advocates, Cathie Wood, says we are witnessing the onset of a new bull market. Backing up this claim, her team at Ark Invest recently published a report called "The Bitcoin Monthly," which highlights several on-chain metrics showcasing Bitcoin's overall health and trajectory.
Looking back on October, here is what the report had to say.
Image source: Getty Images.
Much-needed momentum
One of the most straightforward measures to capture the state of the Bitcoin market is the 200-week moving average (WMA). When Bitcoin's price is below the 200 WMA, most experts agree that Bitcoin is in a bear market.
As a crypto winter set in, unsurprisingly, Bitcoin's price spent much of 2022 below the indicator. In fact, it was the longest stretch that Bitcoin's price spent under the 200 WMA in its history. But with the arrival of 2023, Bitcoin jumped above the 200 WMA briefly before falling below, and then only flirted with it for most of the year.
However, the big jump last month was a decisive move to add much-needed breathing room between Bitcoin's price and the 200 WMA. As the most significant increase of the year, Cathie Wood and her team believe this could be the beginning of more to come.
Historical trends continue to play out
Ask anyone who has held Bitcoin since its early days, and they will likely tell you that the cycles between bull and bear markets are nothing new. Data backs this claim up as well. When analyzing Bitcoin's price, it becomes clear that it follows a cyclical pattern that revolves around halvings.
Occurring roughly every four years, or once 210,000 blocks are added to Bitcoin's blockchain, Bitcoin's supply growth rate is cut in half with each halving. Although this seem like an insignificant event, the halving is highly influential on Bitcoin's price, as it alters the dynamics between supply and demand.
Data suggest that Bitcoin's price usually hits a bottom about a year and a half before the next halving. In Ark's report, analysts used this bottom to measure Bitcoin's current price action relative to previous cycles. As it turns out, this cycle is playing out like those in the past.
Typically, Bitcoin makes modest gains as the halving event approaches, followed by more significant appreciation after the halving. With the next halving slated for April 2024 and Bitcoin following a similar pattern to previous cycles, Cathie Wood and Ark believe Bitcoin's best days remain ahead.
An ideal entry point
Although it may seem like Bitcoin might struggle to keep up its momentum, considering it is up more than 125% this year alone, Cathie Wood remains steadfast in her belief that Bitcoin has plenty left in store for the disciplined and consistent investor. Hindsight is always 20/20. But as Bitcoin remains on a trajectory resembling previous cycles, today could be an opportune moment to buy in preparation for the probable next bull market.
Holding on to Bitcoin through the peaks and valleys is part of the Bitcoin journey to price appreciation. While it may seem daunting to invest in while its price remains 45% below its all-time high, those who have the discipline to take advantage of the opportunity at hand may be grateful should Bitcoin continue to follow its current trajectory.
