As the search for direction continues in the cryptocurrency markets, Michael, an analyst at The DeFi Report, one of the leading analysis platforms in the sector, evaluated Bitcoin’s (BTC) current cycle, potential bottoms, and expectations for the upcoming period in a comprehensive report.
Last September and October, an analyst who timed his move perfectly by almost entirely converting his portfolio to cash (risk-off) before the big crash, suggested that the “ultimate bottom” for Bitcoin may not yet have been tested.
Michael strongly opposes common market narratives such as “This time the cycle has been broken” or “We’ve entered a supercycle.” He argues that the 4-year cycles in crypto are not a narrative but rather a “law of nature” similar to credit and business cycles in traditional markets, dividing the market into four main phases.
- Early Bull: The period when nobody realizes it’s a bull market (e.g., early 2023 – October 2023, when Bitcoin quietly rose by 100%).
- Wealth Creation: The phase that began with the approval of ETFs and shifted attention to on-chain solutions, with increased DeFi lending volumes.
- Wealth Distribution: The period when leveraged trading peaks, smart money gradually exits, and retail investors enthusiastically enter the market.
- Wealth Destruction: The current bear market phase, which has been ongoing for approximately 8.5 months.
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The analyst noted that Bitcoin has only fallen around 53% since its peak in this cycle, indicating that on-chain data shows there hasn’t been enough “air” draining from the market compared to past bear markets.
After 8.5 months of the 2018 and 2022 bear markets, approximately 15.5% of the total market value gained during the bull season had been wiped out as “incurred losses” on the chain. In the current cycle, this rate is currently at 8.3%.
In the past, 43% to 62% of capital increases during this phase of a bear market were realized at a loss, whereas currently this rate is only 24%.
According to Michael, this data signals that the market hasn’t yet experienced enough capitulation and pain, and therefore another downward wave may be coming.
Based on current data, Michael gives a 30% to 40% chance that the macro bottom has already been reached, while he sees a 60% to 70% probability of Bitcoin experiencing another downward breakout.
The analyst noted that Bitcoin has historically always touched the Realized Price level during bear markets, currently around $54,000. He stated that the price could drop to the mid- or lower levels of $50,000, but even if this happens, we would still have experienced a much shallower bear market compared to the 75% drop in 2022.
However, he added that if a large and unexpected systemic collapse similar to FTX is triggered, the $40,000 level could be seen, but that this is not the main scenario.
The analyst said the following about potential catalysts that could drag the market down:
It was claimed that Michael Saylor promised a high fixed return of 11.5% on the “preferred shares” he issued, but the company did not have the cash reserves to pay this for a long time. It was suggested that if Bitcoin continues to fall and demand for these debt instruments decreases, Saylor might be forced to sell Bitcoin to fulfill his commitments, which could create a sudden sell-off in the market.
He noted that Bitcoin has shown the strongest correlation with NASDAQ in history this year, but that Bitcoin is generally a leading indicator. He said that leverage in crypto has been largely eliminated, and the real risk is a sharp correction that could occur in traditional stock markets.
*This is not investment advice.
