Where is the bottom of Bitcoin? This is a topic that the market is very concerned about at present. Some people believe that the bottom of Bitcoin needs further confirmation; some investors believe that the bottom has been reached when the bad is exhausted. This article will discuss the trend changes that will happen in the market from the life cycle of the crypto market.
Like traditional Economic and Financial Marekt, crypto also has cycles of ups and downs. Crypto market cycles last on average about 4 years or about 1275 days. We can use the Bitcoin price as a parameter to define the cycle by achieving a price below the market price (the current trading price of the asset). From a qualitative perspective, each cycle marks progress in terms of product and adoption, providing a springboard for the next cycle.
Since the birth of Bitcoin, BTC mining rewards have been halved every four years, and Bitcoin's trend market has therefore experienced a bull-bear cycle. The four-year halving of Bitcoin is essentially in line with the short-term economic cycle, the Kitchin cycle.
Here is an overview of the situation since the start of the crypto market cycle in 2012:
2012-2015: Hacker Age + Ethereum takes off, the main theme of this cycle is the proliferation of new crypto exchanges and wallets.
2016-2019: The ICO era & DeFi was born with a big price drop, but this sell-off didn't destroy the entire market.
The theme of the 2020 market cycle will be AI, as artificial intelligence is about to revolutionize the Internet.
There are four market life cycles:
Overweight stage : Through address tracking, it can be found that investors or institutions begin to increase their holdings of Bitcoin at low prices. The price of BTC usually fluctuates in a narrow range, while first movers open positions. During the overweight phase, trading volumes usually remain low.
Markup phase : This phase is characterized by a sharp break from the overweight phase as trading volume increases, demand for Bitcoin increases, and adoption rates increase. This leads to a sharp increase in the price of Bitcoin - during this phase, the price usually breaks through previous all-time highs.
Allocation phase : This is the period when early adopters start to profit as prices continue to rise. This causes trading volumes to decrease and prices to begin to level off. Bitcoin can be described as "sideways trading" during this phase.
Panic Phase : This is the final phase of a market correction, when the price of Bitcoin falls sharply. This usually leads to a persistent bear market that can last for months or even years before the overweight phase begins. During this phase, most people cannot afford to withdraw and eventually sell at a loss - driving the price down further.
Markets are constantly changing, which themes are likely to dominate the next bull market cycle
Each bull market brings a set of key themes and trends. Projects that fit these trends often outperform the market average, and first movers can sometimes go on to take their place in the largest and most well-known blockchain projects. The last round of the bull market saw the rapid rise of blockchain, leading a series of X to Earn projects from Move-to-Earn's StepN. It has also spawned Cryptocurrency gaming giants such as Axie Infinity, Gala Games, Star Atlas, and Enjin Coin.
Metaverse and NFTs were also a prominent theme in the last bull market, with projects like The Sandbox and Boring Ape seeing huge growth in terms of daily active users (DAU) and market cap. 2019 to 2022 also sees a dramatic expansion of the Metaverse. Like previous bull markets, the next bull market cycle is likely to be dominated by a handful of pervasive themes that determine which projects will be built, adopted and funded.
Although the market is constantly changing, and it is impossible to predict which narratives will dominate the next bull market, a number of potential examples are currently forming - some of which may continue to be key themes in the next bull market.
Artificial intelligence (AI)
Thanks to the huge success of traditional AI products such as Midjourney and ChatGPT, the world has now started to pay attention to the huge potential of artificial intelligence.
Development activity in the blockchain AI space has increased significantly, and technological advancements are driving the development of the next generation of blockchain projects that support artificial intelligence, some of which may continue to define the industry.
Layer2
During the bull market, popular Layer 1 such as Ethereum, Bitcoin, and even the BNB chain were pushed to their technical limits as the number of active wallets skyrocketed with DeFi activity. Layer 2 platforms can help ease the load on Layer 1 by batching transactions together off-chain before submitting proof of validity to Layer 1 to complete the transaction. This helps significantly expand the number of transactions that L1 can process, while improving the gas efficiency of smart contracts and users. The hot spot for ZK-Layer 2 is gaining momentum in 2023.
Arbitra ecosystem
The total locked-in value (TVL) of Arbitrum-based DeFi protocol and DApps is now close to $2 billion - making Arbitrum the fourth largest blockchain by TVL. At the same time, the number of active Arbitrum addresses has increased significantly in recent weeks - more than doubling in the first two months of the year alone.
How do users take advantage of the market cycle?
Although market cycles are fairly easy to understand, crypto assets are still a new asset class with new underlying technology. Furthermore, market cycles may not always have the same pattern, and market participants often only have to look back to the past to distinguish them.
DYOR (Do Your Own Research)
All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial or other advice. Nothing contained herein constitutes a solicitation, recommendation, endorsement or solicitation by X Exchange to invest in, buy or sell any crypto assets.
While there is no foolproof way to predict the future. By understanding how the Cryptocurrency market cycle works, we can gain a better understanding of the big picture and the market itself. Crypto assets may increase or decrease in value, and you may lose all or most of your purchase price. When evaluating crypto assets, you must conduct research and due diligence to make your best judgment, as you are solely responsible for the consequences of any purchase.
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