Some investors are anticipating a new bull market for 2024, and the arguments made are worth exposing. Indeed, beyond bitcoin’s cyclicality, a number of converging elements support this scenario. However, the volatility of bitcoin (BTC) calls for caution. Deciphering the market forces that could manifest themselves in a year.
A favorable bitcoin cycle?
First of all, the study of bitcoin prices shows a cycle close to 3.5 years to 3.6 years. Indeed, we must remember that bitcoin is highly correlated to long-term stock indices. A similar cycle, known as the kitchin cycle in economics, can thus be seen in stock market indices. It therefore seems a priori coherent to us to notice the presence of such a cycle on bitcoin.
“It is very likely that a cycle lasting 3.5 to 3.6 years does indeed influence the price of bitcoin. In fact, this observation is not only supported by empirical observations. The mathematical approach, as well as the economic and financial approach, support the idea that bitcoin is not really free to move. We must first reiterate that cycles of 40 to 42 months (43 months in the case of the 3.6 year cycle) are business cycles. »
Read more: Is there a 3.5 year cycle in cryptos? – Tremplin.io
In our previous study, we showed that three phases can be identified on each cycle. So we can usually identify a stagnant/slightly bullish market for 1 year or 1.5 years. This phase is followed by a strong bull market lasting close to a year. Finally, we generally witness corrective phases which sometimes last exactly one year.
| Cycle No. | Hollow | Summit | Duration trough to trough | Hollow-to-peak performance |
| 1 | November 2011* | December 2013 | — | +968% |
| 2 | January 2015 | December 2017 | 3.1 years | +8,328% |
| 3 | December 2018 | November 2021 | 3.9 years | +1,961% |
| 4 | November 2022 | — | 3.9 years | — |
| AVERAGE | November | December | 3.6 years | +3,752% |
2024 would be half of the ascending phase?
Once this is established, the observation of past prices may seem more obvious to the reader. On social networks, some do not hesitate to explicitly highlight the breakdown below. This approach deserves our curiosity, because nothing seems to contradict it a priori.
But this approach must of course be moderated by the small sample of data available to us. Indeed, over 10 years, the mathematical study for example brings out a cycle closer to 4.4 years, then 1.8 years, etc… Therefore, many other cycles may seem valid, but the Kitchin cycle shows despite everything a temporal resonance. Assuming the last low was in December 2022, the next ideal cycle high would be around mid-2025. In this configuration, the year 2024 would be a year of transition towards a more bullish market.
The chart above shows the price of bitcoin in black. We have added below its dominant cycles from a Fourier series decomposition with a band pass filter. Therefore, it appears that the return of bullish forces could be gradual in the coming months. The current stagnation of bitcoin would be explained by a theoretical opposition between the trends at 3.5 years and the trends at 1.8 years.
What behavior towards central banks?
We know that bitcoin is generally highly correlated to indices on the one hand, and oriented in the direction of liquidity on the other. It is notable that in the last two bull markets, bitcoin’s rise came after a period of falling policy rates, and sometimes during a period of rising rates, but rarely on a plateau of flat rates.
Therefore, it seems correct to us to say that a bull market on bitcoin will only be possible after an easing of the stress on the markets. In this context, we must remember that central banks could be encouraged to stabilize rates in 2024. This would reflect a deterioration in the job market, growth, inflation, etc. In the end, this would be very harmful for clues and sources of tension. In this sense, monetary policy could curb this new bull market if it is not, however, reversed over time. But that remains in the realm of hypothesis.
The sharp rise in central bank rates may also limit the inflow of liquidity into the market. The issue of the next bull market is all the more strategic as nothing really allows us to judge its extent. Of course, a return to previous highs ($69,000) would be the first desirable goal, followed by extensions. We know that bitcoin’s value is critically dependent on long-term cryptocurrency usage.
The halving: big event of 2024!
This hypothesis based on the study of prices is also confirmed by the events that punctuate the life of bitcoin. Indeed, each halving, which announces the reduction of the remuneration of miners by 2, often announces a bull market. The next halving could take effect around April 2024. At that time, miners will see their bitcoin reward halved. Therefore, for an equivalent number of users, miners will have to be more efficient. Users who want to insure transactions will thus be incentivized to increase rewards.
This is where an important element comes in. It turns out that the rise in the price of bitcoin is often symmetrical to a drop in its velocity, that is to say in the frequency of exchange. We can therefore assume that the halving reinforces the fall in bitcoin velocity, which at constant demand causes the bitcoin price to rise. The rise in the price thus leads to a virtuous circle which allows the market to readjust.
As a result, the price of bitcoin is rather linked in the long term to its mining difficulty and its hash rate. Indeed, the mining difficulty and the hash rate are directly related to the number of transactions and users. We find here a possible element of explanation for bitcoin cycles, although the index correlation hypothesis remains the most likely. In any case, 2024 does indeed present some disposition to generate a bull market.
On the scale of future trends
If the temporality of bitcoin is describable, the magnitude of the movements observed is more random. Indeed, the best performing bull market was recorded between 2016 and 2017. Nevertheless, we observe a decrease in the volatility of the price of bitcoin in the long term. This mechanically reduces its upside potential. But we clearly see that the symmetry between bitcoin’s price and its hash rate would not make the latest highs unbreakable.
Necessarily, the magnitude of the expected trends is a delicate matter. No traditional valuation tool can shed light on this question. Moreover, if the hypothesis of a bull market remains a possibility, the extent of the trend to come is all the more so. In addition, the last months of the US pre-election period often herald relative stagnation in the indices. The addition of possible monetary or cyclical constraints could therefore deviate from this scenario.
Thus, the potential for a hypothetical bull market from 2024 would be based on the ability of central banks to ease their policy, the ability of stock market indices to perform sufficiently by 2025, and mechanically, the ability of the economy to remain resilient (no recession). Otherwise, it would probably set back the stated scenario.
In conclusion
Finally, we recalled that a cycle of 3.5 years always seems to stand out from the evolution of the price of bitcoin (BTC). Current developments are in line with this hypothesis, which would thus allow a bull market to take shape in 2024. But that is without counting on the economic and financial context, which will influence the magnitude of this scenario. Furthermore, the halving should occur in the spring of 2024 and also appears as a favorable signal. The magnitude of the bull market will be greater the greater the reduction in the frequency of exchange of bitcoin.
Despite everything, bitcoin remains a volatile asset and other cycles can be identified. While it is clear that the stabilization observed over the first 8 months of 2023 contrasts with the year 2022, the hardest part of the way remains to be covered. We will therefore be particularly attentive in the coming months to the evolution of the stock market indices, the economic and financial situation, and the conformity of the bitcoin price in the face of its identified cycle. In any case, 2024 would present a certain number of provisions for its good orientation.
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