After hitting an all-time high of $124,457 on Aug. 13, Bitcoin (BTC 0.35%) dropped, bounced up a bit, then continued sliding to its recent price of about $110,000.
Not surprisingly, crypto investors are now asking: Is the current Bitcoin rally over, or is there still more to come? To answer that, let's take a closer look at the data.
Image source: Getty Images.
The big picture
First of all, investors need to remember that cryptocurrency is a remarkably volatile asset class. Prices can swing wildly on a monthly, weekly, and even daily basis. So a 12% decline is really nothing new. In previous Bitcoin rallies, plunges of 30% or more have been the norm.
Moreover, if you step back and zoom out, nothing really seems to be amiss with Bitcoin right now. It's still up 17% for the year, and has gained 70% during the past year. Who's going to argue with that type of performance?
And, as longtime crypto investors know, Bitcoin typically cools off in August and September, before picking up steam at the end of the year. In 2024, Bitcoin fell 8.6% in August, before going on to post triple-digit percentage gains for the year. In 2023, Bitcoin fell 11% in August before going on to post triple-digit percentage gains for the year. So, again, there's nothing to be overly concerned about, based on the historical data.
Key Bitcoin indicators
Given that Bitcoin now has a 16-year history, there's plenty of data to understand what typically happens when Bitcoin approaches a final market top. Crypto data and information provider CoinGlass, for example, tracks a list of 30 "Bull Market Peak Indicators" for Bitcoin. Right now, zero (zero!) of them are flashing red. That should give investors at least some peace of mind.
Admittedly, some of these Bitcoin indicators are very obscure. For example, if you're solely relying on the "Pi Cycle Top Indicator" (a technical analysis indicator that looks at Bitcoin prices over different time intervals to forecast when the next peak might occur) to make capital allocation decisions, you might want to rethink your investment methodology.
But some of the indicators make a lot of sense for long-term buy-and-hold investors. One of these indicators is "Days of ETF Net Outflows." Basically, it looks at how many consecutive days there have been net outflows from spot Bitcoin exchange-traded funds (ETFs). If this number hits 10, then that's a warning signal. It means investors are panicking and relentlessly withdrawing money from the spot Bitcoin ETFs during a two-week period. Right now, though, that indicator is only at 6.
Is it really different this time?
Legendary investor John Templeton once remarked that the four most dangerous words in investing are: "This time it's different." During any bull market rally, it's tempting to think that things have changed so dramatically that nothing bad can ever happen. The price of an asset will just continue to go up in perpetuity.
CRYPTO: BTC
Key Data Points
That may be overstating things, but to some degree, that's what many Bitcoin bulls are counting on these days. From their perspective, Bitcoin was once a highly volatile, highly speculative asset that was primarily retail-driven. And that's what led to shocking declines, huge volatility spikes, and the infamous four-year Bitcoin cycle, in which the price of Bitcoin tends to collapse in value every four years.
According to the this-time-it's-different crowd, Bitcoin is now a much less volatile asset. It now has the support of long-term, stable institutional investors, who (theoretically) will be much less prone to panic selling than retail investors. And it has the support of the U.S. government, which is now advancing a pro-crypto and pro-Bitcoin agenda. All of this would seem to imply that the historical four-year Bitcoin cycle is being smoothed out, and the price of Bitcoin is poised to rise from here on out.
At the end of the day, a dip of 12% is nothing to get worried about. This happens all the time with Bitcoin. Of greater concern should be the four-year Bitcoin cycle.
If history is any guide, then we could be nearing the end of the 2024-2025 bull market rally. The last Bitcoin halving took place in April 2024, so we're now 16 months into the most bullish phase of Bitcoin price appreciation. In all previous Bitcoin halving cycles, the longest period of Bitcoin price appreciation was 18 months.
And that's what really worries me. Investors may be so blinded by ultra-bullish $1 million price forecasts for Bitcoin, that they are willing to dismiss data from previous Bitcoin cycles. Is it really different this time? If you think it is, then this could be a prime buying opportunity. But if you don't, then you might want to stay away until there is more clarity on where Bitcoin is headed.
