4 Bitcoin Bull Markets: Big Lessons to Learn

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Wall Street’s so-called “experts” are creatures of habit. They behave in patterns that are as predictable as the tides.

When a market soars into bubble-land, they pour out of the woodwork to cheer the “powerful fundamental forces” that are driving prices higher.

When the bubble inevitably bursts, they scramble to predict its demise.

And precisely when a brand-new bull market is in the making, they pronounce its last rites.

Rarely is this pattern as clear as in cryptocurrencies, a much-maligned asset to begin with.

Just today, I found two strident Bitcoin eulogies. One refers to the “mother of all bubbles.” The other says that there’s no future in crypto.

The Bitcoin-is-dead crowd now predicts the mother of all cryptocurrency bubbles. History shows us the next bull cycle is still in the making; the charts and fundamentals support it.

Neither mentions that both the market and the market analysts are subject to the same cyclical pattern that repeats itself regularly:

Bitcoin enjoys a massive bull market, culminating in a frenzied parabolic surge of speculation — the period we call “the climax.”

It comes crashing down as speculators beat a panicky retreat.

It consolidates for months, creating a dead zone of sideways action or further decline, from which only the diehard survive.

And it launches a new bull market, repeating the cycle — again culminating in a blast-off climax.

But here’s the key:

In Cryptocurrencies, Each New Cycle Peak
Is Dramatically Higher Than the Previous One.

The story begins in September 2010, just eight years ago, when Bitcoin was trading at close to 6 cents. Today, this same asset is trading at around $7,000 per token, a return of over 11 million percent.

No, the path from a half-dozen cents to thousands of dollars isn’t easy. Nor is it a straight line. But that’s the whole point: It happens in a cyclical pattern and that cycle is ultimately predictable.

Bull cycle #1. September 2010 to June 2011.


Bitcoin begins the cycle with a powerful but non-parabolic rise — from 6 cents to 80 cents by April 2011. Until this point, the rise is driven mostly by Bitcoin users and long-term investors who understand the technology and share the vision of its founder.

Then, suddenly, average investors begin to pile in. But the market is still minuscule, extremely illiquid and unable to accommodate crowds. So prices go ballistic: Bitcoin literally blasts off to the stratosphere, surging from 80 cents to a high of $36. (See blue-highlighted area of chart.)

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The crash follows immediately thereafter, as Bitcoin plunges by 93%! Much like today, naysayers re-emerge — ranting about the “a failed experiment,” raving about “the death of Bitcoin.”

But it never trades below $2. So …

Even at the ultimate bottom of the crash, investors who bought at the beginning of the bull market cycle sit on gains of 38 times their original investment.

Bull cycle #2. October 2011 to April 2013.


Like in the prior bull cycle, Bitcoin enjoys a very solid run from its $2 low to about the $10 level, up fivefold.

Long-term buy-and-hold investors (nicknamed the “HODLers”), who bought early in the prior cycle, are delighted. But anyone who joined the prior cycle during the frantic run-up to $35 is still frustrated.

The frenzy returns in early January. The king of cryptos breaks out above $13 and starts accelerating to the upside once again, exploding to a nosebleed bubble high of $260 in April 2013.

Total rise from bottom to peak: about 13,000%! But again, the overwhelming bulk of the move is jammed into just two short months, from February 2013 to April 2013.

The bust strikes with even-greater fury. In less than a week, Bitcoin is back down to $50 by April 15 — an instant 80% crash!

And as usual, the “Bitcoin-is-dead” crowd dominates the headlines.

But as in the prior bull run …

Even at rock bottom, anyone who bought near the beginning of this cycle is sitting on an asset worth five times their original investment.

Bull cycle #3. April 2013 to December 2013.


As before, the recovery from the April low of $50 is initially slow, reaching the $100 level by Oct. 1, 2013.

And as before, it’s the last two months that deliver the giant price explosion — to $1,160 by December, a surge of 1,160%.

Irrational exuberance infects not only average investors, but also the media, which sings the praises of crypto … until, that is, the next bust strikes, ushering in Bitcoin’s longest bull market to date:

From its $1,160 high made in December 2013, Bitcoin plunges to a low of $150 by January 2015, an 87% decline.

The bear market is so long and so deep, Bitcoin evangelist Andreas Antonopoulos says he’s worried about the future of crypto.

But as before …

Even at the bottom, investors who bought at the beginning of the cycle still have tripled their original investment.

Moreover, this point is also the beginning of the greatest Bitcoin bull market of all time …

Bull cycle #4. January 2015 to December 2017.


It takes Bitcoin a couple of years to recover from its great bear market of 2014.

Then, the big action begins in 2017, as Bitcoin launches a solid move from roughly $1,000 in January to about $5,000 in October.

As in the three previous cycles, however, it’s not until the last two months of the bull run that the public jumps in with both feet. Prices rise like a rocket. Bitcoin surges to its high of nearly $20,000 by December.

And of course, the crash inevitably followed — taking Bitcoin down to $5,800 on Feb. 6, 2018, a 70% decline.

Many analysts, not personally familiar with the prior bull cycles, argue as if this is somehow “a new phenomenon.”

But as you’ve clearly seen, it’s anything but.

It’s déjà vu. And for the third time!

The Next Bull Cycle
is Still in the Making

If history is any guide …

• The first few months of the next bull cycle could be slow and choppy. Don’t expect prices to explode suddenly. But this will be the ideal time to invest.

• The core of the bull market will be solid but not parabolic. A good time to add steadily to your holdings.

• It’s not until the final blow-off phase that you will see Bitcoin make new all-time highs and rise parabolically. Time to take most of your money off the table in phases.

• The next crash is bound to wipe out at least half of the gains. But as before, early investors will still come out ahead. Even those who just HODL should be sitting on some fat profits.

3 Major Changes in
the Bitcoin Bull Cycles

Some analysts may think the ups and downs in Bitcoin are just an endless merry-go-round. But the fact is, with each bull cycle, the cryptocurrency markets are also evolving and making progress toward a more mature phase, ushering in three major changes.

Change #1. Bitcoin is no longer alone.

With each cycle, especially the most recent one, a wide variety of new cryptocurrencies have been introduced — several with far more advanced technology and use-cases. We’ve seen the introduction of Ethereum and smart contracts … the emergence of Ripple, Stellar, NEO, EOS and Cardano … and soon, Hedera Hashgraph.

Change #2. Trading volume and liquidity have improved.

Consequently, the climactic phase (the last two months) of the bull cycle is becoming relatively less extreme.

• In the climax of the first bull cycle (ending June 2011), Bitcoin shot up 4,500%.

• In the climax of second bull market cycle (ending April 2013), the rise was 1,300%.

• In the climax of the third cycle (ending December 2013), prices increased 1,160%.

• And in the climax of the fourth cycle (through December 2017), Bitcoin surged by 400%.

Change #3. Adoption and infrastructure have steadily grown.

Before 2010, all trading was over the counter. In 2013, only one exchange existed. And in 2014, the biggest exchange, Mt. Gox, failed. But the consequence was the birth of dozens of new, more secure exchanges. And today, there are 206 operating exchanges, according to CoinMarketCap.com.

Stepping back from the trees, it’s clear that the best days of cryptocurrencies are yet to come.

From a fundamental standpoint, engagement in cryptocurrencies has never been greater. The infrastructure and underlying technology are in the best state that they’ve ever been. In the long term, there’s only one way to go from here: onward and upward.

Best,

Juan

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Comments 6

John Baker September 7, 2018

Great article Juan….thanks

Reply

John Mahler September 7, 2018

I am trying to find an exchange on which I can purchase EOS. Bittrex has a coin NEOS but I am not sure if that is the same as EOS. Any data on this? John Mahler

Reply

Roger GARRAMORE September 8, 2018

Juan,
Great insight, thank you.

Reply

Bill Oliver September 8, 2018

Great article. We need more.

Reply

Bob Schubring September 11, 2018

Lyndon Johnson and Charles DeGaulle had a fundamental dispute over how to fight the Cold War, that led to a currency crisis once. At issue was an invention by two US Air Force materials scientists, who had devised a high-temperature ceramic with the same thermal expansion behavior as a particular high-temperature metal alloy. Metals have good tensile strength but ceramics, when pulled in tension, tend to shatter…so a ceramic-coated metal, if the ceramic and metal expanded and contracted with temperature and the ceramic didn’t tend to break off the metal, would be useful in making jet engine turbine blades, because they could be put directly in contact with flames. The USAF scientists wanted to build turbine engines that, by exposing the turbines to the high temperatures found inside flames, would attain higher efficiencies than previous turbine engines did. Improved fuel efficiency would enable aircraft to operate over longer distances without refueling.

The C in C-Level dispute arose, over what to do with this tactical advantage.

LBJ favored applying it to a supersonic bomber design, the B-70. Conceived in the early 1950s as soon as Bell’s X-1 rocket plane proved that supersonic flight was feasible, the B-70 was meant to have supersonic capabilities for use in eluding Soviet fighter aircraft and delivering a precision payload of highly-toxic VX nerve gas bombs to the deep underground bunkers in which Soviet commanders would be commanding the ballistic missile war going on overhead. The goal of the design was to keep war off the Soviet list of desirable options.

Charles DeGaulle, who had actually seen an economic war waged during the buildup to Nazi occupation of France, and during the occupation itself, saw the USAF scientists’ invention entirely differently. If there was a technology that made turbine engines more fuel-efficient, putting that technology to work in the civilian economy to boost productivity, would make the Cold War survivable over the long term. DeGaulle saw the strategic threat as a Soviet siege of the Free World, that would slowly starve us of capital until we surrendered, whilst LBJ thought in terms of blitzkrieg. France had lost the Fascist economic siege in the 1930s. France had the funds to build the Maginot Line of concrete forts and tank traps that kept their German border secure, but lacked the money to extend it over their entire land border with other countries. In May of 1940, the Maginot Line performed as intended, deterring German attack. The trouble was that Belgium hadn’t taken the Nazi threat seriously and found itself invaded one morning, by German troops who marched across Belgian territory into France, circling around the Maginot Line. (French general Henri Petain, who was then President, ordered his troops to withdraw from the Maginot Line and march south, where an Italian army was also invading France, apparently as part of a secret Hitler-Mussolini pact that would divide France between German and Italian occupiers. Petain defeated the Italians, but an outnumbered British force that remained in the north, had to be evacuated at Dunkirk. France preserved a shell of a government by agreeing to let occupying Germans occupy the north, while maintaining a disarmed French state in the south that governed the country from Vichy, but allowed the Germans to make all the important policy decisions for France. A minority still think Petain was a hero. DeGaulle publicly denounced Petain as a traitor. And the real lesson DeGaulle came away with, was that the Maginot Line would have worked, if France had only been able to fund it’s construction to protect their entire border, not just the border with Germany. Hence his focus on prevailing in an economic war with the Soviets.)

The problem Charles DeGaulle had, was to make his protests known in Washington. He used the only peaceable means at his disposal: He attacked the US dollar, by redeeming dollars for gold. After demonstrating that he was serious, DeGaulle found allies at the Atomic Energy Commission, where there grew to be efforts to promote a High Temperature Gas-Cooled Nuclear Reactor (HTGR), that would have higher thermal efficiency than today’s steam-powered nuclear plants. The trouble with the HTGR idea, is that it introduced a new materials challenge, of making the turbine blades radiation-resistant. The hope, initially, was that the French/AEC science effort would independently find, and publish about, some other metal/ceramic combination almost as good as the one developed by the USAF scientists, and someone would then proclaim, “We can use this new material in combustion engines, without waiting for nuclear technology to evolve further!”. LBJ’s secret B-70 program would stay secret.

Keeping anything with that many moving parts running, is difficult. France repeatedly needed to attack the dollar, to show their seriousness about getting advanced gas turbine technology into civilian hands. The B-70 prototypes never actually flew with engines sufficiently powerful to run them properly, for lack of development funding. One prototype was destroyed in a crash.

Eventually Georges Pompidou replaced Charles DeGaulle and worked out a deal with Dick Nixon. NASA, who tried to rescue the USAF B-70 program with a proposed civilian supersonic transport plane, cancelled funding for the transport plane on orders from the White House. For good measure, Nixon’s new EPA devised a scheme of shock-wave prevention, on a crackpot theory that sonic booms crack bird eggshells, and outlawed supersonic flight over most of US airspace. Further French attacks on the currency were stopped, by closing the Gold Window to everyone except the King of Saudi Arabia. And a secrecy agreement was worked out, under which USAF contractor GE would build parts of a working turbofan jet engine (namely the special flame-resistant parts) and a French company would build the more-conventional parts, resulting in a high-efficiency turbofan engine for slower-moving airliners. The French company grew into Airbus. Boeing adopted the engine design for it’s popular 737 jetliner.

Now that the high-efficiency combustion engine technology exists, it’s making inroads on our power grid, as well as in our skies. Most new power plants built in the US over the past decade, use high-efficiency gas turbines and fire natural gas, which is rather cheap. Commonly they achieve 51% efficiency. The best efficiency possible with older steam plants was 45%. China, where natural gas is scarce and costly, has begun building coal gasification plants, adapting high-efficiency gas turbines to burn a mixture of hydrogen and carbon monoxide that’s made from coal, gaining more electrical energy per ton of coal and keeping the turbine exhaust free of soot. (A problem in China is that it’s difficult to throttle a gasifier down, during low-power demand periods. So the new clean power plants run constantly to cover the base electric load, and older steam plants that generate a lot of airborne soot and ash, throttle up to produce additional power to cover peak electric demand. This results in dirty air in Beijing and elsewhere.)

A lot of that dirty air is being made to keep Bitcoin mining machines operating.

Sensibly there ought to be some sort of arbitrage possible, that pays China’s Bitcoin miners to power off some of their equipment during peak electric-load periods, enabling the dirty power plants not to operate.

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Gerda Groemig September 18, 2018

The fact that the technology of other cryptocurrencies are – as you say – more advanced then
Bitcoin, why are still thinking that Bitcoin will be the leading cryptocurrency among the top
20 – and being within banking in some sort why is Ripple so very low in it’s price – looks nearly like a ‘penny’ stock amongst the crytos and should be a good start for a very small investor –
with patience – or could it be wiped out totally and one would loose everyting – never mind the
low price now – knowing that penny stock’s can go bust instantly ?

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