Research
Research & insights
In-depth bitcoin research and insights from industry experts. Analysis you won't find anywhere else.
Research
In-depth bitcoin research and insights from industry experts. Analysis you won't find anywhere else.
Jesse Myers | Chief Operating Officer
Jul 10, 2023
There have been two iron rules of Bitcoin’s four-year price cycles:
1. The bear market low never goes below the prior peak.
2. Each bull market delivers less upside than the cycle before it.
In November 2022, we broke rule #1 (the $15k price bottom was below the $20k peak from 2017).
I’m starting to think we might break rule #2 after the upcoming halving.
My thinking consists of two pieces. First, last cycle’s bull market saw headwinds that are unlikely to exist during the next bull market. Second, there are new tailwinds brewing that could fuel the next bull market in a big way.
Despite rallying ~8x from the 2020 halving to the 2021 peak, Bitcoin’s price performance paled in comparison to prior cycles. Here’s how the last cycle compared to the 4-year halving cycles that preceded it:

This decaying amplitude of bull markets is to be expected in one sense. This is because each subsequent halving represents a smaller reduction of new supply issuance relative to the circulating supply.
The best security available for your bitcoin without the technical burden. It's time to upgrade.

However, I’ll argue that we were on track for the 2021 bull market to deliver ~15x performance instead of the ~8x we got. What happened?
The confluence of several factors resulted in a different bull market peak than in all prior Bitcoin bull markets. Instead of a parabolic advance culminating in a blow-off top, we got a bi-modal rounded top spread out over six months.

In my opinion, there were four factors that prevented the bull market from extending into a blow-off top
Without these four factors, I think we would have seen Bitcoin’s price extend into a blow-off top in the ~$125k range. This would have meant a ~15x bull market, as per the table at the top of this article.
Obviously, we didn’t get that. And there’s no point in reflecting on the “what ifs,” except to help us take stock of conditions going into the next Bitcoin halving, now just 10 months away.
The halving is coming. That’s always bullish, specifically because of the supply/demand price mechanics that are set in motion. But what is different this cycle is the supply shortage that is building up already…
1. Exchanges have been seeing a supply exodus for several years

2. 70% of supply is being held by long-term holders now

3. Small holders are accumulating coins faster than Bitcoin is being mined

This last chart says that something has changed.
Small holders are accumulating Bitcoin faster than ever. In fact, the recent spike shows that Bitcoin addresses holding <1 BTC (“Shrimp”) are currently accumulating Bitcoin 100% as fast as new coins are being mined. But accounts holding between 1-10 BTC are also accumulating 100% of the new Bitcoin being mined. And on top of that, accounts with 10-100 BTC are accumulating 75% of the new Bitcoin being mined right now.
Together, that’s 275% of all the new Bitcoin being mined. Right now, individuals are accumulating way more Bitcoin than is being created.
This has never happened before. We have reached some kind of inflection point.
For individuals and small businesses all over the world, Bitcoin suddenly makes a lot more sense. People are accumulating with confidence and urgency – including many of you reading this.
You know the halving is coming in 10 months, you understand the mechanics of what will be set in motion, and you’re determined to capitalize on this rare information asymmetry of understanding something before the world catches on.
Because last cycle’s headwinds are giving way to the tailwinds of an acute supply shortage, the next Bitcoin cycle could potentially be bigger.