Welcome the Rekt Capital newsletter, a place for investors who want to better navigate the crypto markets with the help of cutting-edge crypto research and unbiased market analysis.
Today’s newsletter edition is Part 4 of the Bitcoin Halving series and is free for everybody to read.
I write research articles just like this one every Monday for subscribers of the Rekt Capital newsletter. Upcoming Monday editions will be available to paid Subscribers only.
So if you’d like to receive cutting-edge research like this straight to your inbox, feel free to make the most of the early-bird discount of $5 a month and subscribe today:
Part 4 is the final part of the Bitcoin Halving series and focuses on addressing Bitcoin’s new Four Year Cycle.
I use the cyclicality of Bitcoin’s previous Four Year Cycles to deduce what could lie ahead for Bitcoin’s price in 2021. I also offer an extrapolation of this entire new Four Year Cycle.
While Part 3 offered some exponential price targets for Bitcoin based on historical performance, Part 4 will offer arguably a more conservative target area.
Bitcoin - The Four Year Cycle
I first started sharing my thoughts on the Bitcoin Four Year Cycle in early March 2020:
The most important technical step Bitcoin needed to make by the end of 2020 was to eclipse its previous high of $13,900.
And Bitcoin did just that and more.
Bitcoin decisively eclipsed $20,000 and finished 2020 on a high note by reaching $29,500.
The previous Bitcoin Four Year Cycle is over.
A new Bitcoin Four Year Cycle begins.
The New Bitcoin Four Year Cycle
There is no denying that the Bitcoin Halving serves as a major catalyst to Bitcoin Bull Markets.
And this time was no different.
In fact, the Bitcoin Halvings tend to play an important role in forming the Four Year Cycles.
That is, the Halving events take place in Candle 4 of the old Four Year Cycle; months before the exponential Candle 1 of the new Four Year Cycle takes place.
Bitcoin Halvings precede the exponential Candle 1 of a new Bitcoin Four Year Cycle.
What this suggests is that Bitcoin will experience yet another exponential Candle 1 in 2021.
Is A Retrace Possible in Q1, 2021?
Historically however, Candle 1 tends to first pullback into the same level that rejected Bitcoin for the majority of the previous Four Year Cycle to claim it as support (green horizontal). This tends to occur in the early stages of the new Candle 1.
In the first Four Year Cycle, this level was $733.
That is, $733 rejected Bitcoin in Candles 1, 2, and 3 until Candle 4 eclipsed it, and then the new Candle 1 claimed it as support.
And even in 2011 and 2012 when no Four Year Cycle existed, the price level of $13.14 would reject price for two years until Candle 1 claimed it as support before embarking on an exponential uptrend.
In short: previous Four Year Cycle resistances tend to be claimed as support later on.
So if history were to repeat itself, this would suggest Bitcoin could retrace towards the $13900 area in this current Candle 1 (i.e. which would mean a -60% retracement from $35000, which does seem unlikely at this point).
The problem with this assumption is how exponential the latest Candle 4 actually was.
Before, the Candle 4 would be able to eclipse only the green horizontal and fail to eclipse the black horizontal (i.e. old All Time High).
Of course, Bitcoin was able to invalidate this key historical tendency in this recent Candle 4.
So where does that leave a potential retrace opportunity for Bitcoin?
The only Four Year Cycle level remaining - $20,000 (red horizontal). This would require a -42% retracement from the recently reached ~$35,000.
In Bitcoin’s previous Bull Markets, Bitcoin would typically retrace 21-43%.
How Much Could Bitcoin Rally In 2021?
In my previous October 2020 analysis on Bitcoin’s Four Year Cycle, I measured full Candle Bodies to extrapolate a new Candle 1.
In doing so, I excluded volatile upside as well as downside wicks so as to arrive at a more conservative estimate. At the time, I also assumed $13,900 could be the base for a new Candle 1.
In this newsletter however, I’ll include these upside and downside wicks in the analysis, so as to account for any extreme volatility that Bitcoin may experience throughout its new Candle 1. I’ll also assume $20,000 could be the base for a new Candle 1.
Using recurring price tendencies from previous Four Year Cycles as a guide, I’ll extrapolate this entire new Four Year Cycle:
Accounting for historical upside and downside volatility and a potentially diminishing rate of return in Candle 1 rallies, Bitcoin could rally to as far as $150,000-$170,000 in Candle 1.
This would likely be followed by a Bear Market Candle 2, which historically tends to experience an average correction of -84,5%.
The Candle 3 that would follow thereafter would be the bottoming out candle, which would form at the bottom of Candle 2, while offering scope for some downside wicking, just like in previous Candle 3s.
And lastly, Candle 4 would form just above the top of the previous Candle 3, developing in an effort to eclipse a multi-year horizontal resistance (green), ultimately managing a twelve-month close above it and perhaps even eclipsing the old All Time High (red horizontal resistance) before yet another new Candle 1 forms.
Overall, this extrapolation should serve as a visual guide on what to expect from Bitcoin’s price action for the upcoming years in this new Four Year Cycle.
Thanks you for reading today’s free issue of the Rekt Capital newsletter. Let me know your feedback in the comments!
And that concludes the Four-Part Bitcoin Halving Series. I hope you enjoyed it.
I write research articles like this every Monday for subscribers of the newsletter. Upcoming Monday editions will be available to paid Subscribers only.
If you’d like to receive cutting-edge research like this straight to your inbox, feel free to subscribe for an early-bird discount of $5 a month.
~ Rekt Capital