Delphi Digital co-founder and head of research Kevin Kelly took to X (formerly Twitter) to share his thoughts on the crypto market cycles. According to him, they align closely with broader business cycles and the current one seems to be in the early stages of a new cycle.
With crypto markets battling a lot of “heavyweight narratives” over the last 18 months, the outlook for the next 12-18 months, if looked beyond short-term trade, seemed “significantly brighter”, said Kelly.
According to him, this isn’t just another bear market rally. Risk assets, like stocks and crypto, have been sniffing this out all year. To the people unfamiliar with the matter, the crypto markets could seem chaotic. However, as postulated by Kelly, it points to the consistency in the timing between peak-to-trough bottoms, the recovery duration to previous cycle highs and the timing of price rallies to new cycle tops.
He then uses Bitcoin as a benchmark to explain what a typical cycle looks like. It starts when $BTC archives a new all-time high (ATH), which would be followed by an approximate 80% drawdown, bottoming out a year later. It would then take two more years to recover to the previous high that was achieved, which would rally for another year to touch a new ATH.
Each of these cycles lasted around four years. Here, Kelly believes that its length and consistency isn’t random. The last few cycles followed this blueprint almost exactly where each of them lined up almost perfectly with cyclical changes in the business cycle.
Kelly also talked about the links that were found between Bitcoin’s price peaks and ISM (Institute for Supply Management) Manufacturing Index. They both coincided with each other, showing signs of topping out.
It was also noted that active addresses, total transaction volumes and total fees have also peaked alongside tops in the ISM. He illustrated the same with the chart that showed how closely the ISM has tracked the trajectory of its prior cycles.
With the ISM nearing the final stages of its two-year downtrend, Kelly believes the market to be in an environment akin to one like 2015/17. On top of this, it perfectly aligns with the upcoming Bitcoin halving event in 2024, which could potentially bring a new all-time high for $BTC by the end of that year.
The last two halvings – where the block reward gets cut in half approximately every four years – occurred around 18 months after Bitcoin bottomed and seven months before it broke new all-time highs. The next halving event is expected to happen in April 2024, which is around 18 months from the November 2022 low.
If the flagship cryptocurrency follows its usual cycle playbook, it would then imply a new ATH by Q4 2024 (and a new cycle peak by Q4 2025), said Kelly. He thinks that the market will directionally follow a similar path as prior cycles, not just by coincidence.
However, he also warned saying that just because the longer term outlook is getting brighter doesn’t mean we can’t or won’t suffer more corrections: “This is actually around the time when we could see another modest selloff or period of price consolidation, especially after the strong rally we’ve seen over the last ~9 months (similar to 2H 2019).”
He ended his X thread post saying that more and more catalysts were stacking up for the crypto market, where in the long-term, outlook for the next 12-18 months looked significantly brighter.
