As Much as We Tried to Ignore it, 2022 Was History Predictably Repeating Itself
Here's a quick test for you - What do these three charts have in common?
If you guessed that these were all charts during what are commonly accepted as the "Accumulation Year" of Bitcoin's 4-year cycle, you've won yourself a metaphoric trophy. 2014, 2018, and 2022 were all historically bad years during the now 14 years of BTC's existence.
And it's no coincidence that they all come after great, ultra bullish years that established new all-time highs (2013, 2017, 2021). Though not a perfect alpha barometer for predicting whether prices will be going up or down, the pattern of every four years seeing a euphoric stage followed by a fearful, profit taking phase has become fairly predictable.
But with 2025 being the next cycle to follow the prosperous cycle that is being paved by 2013, 2017, and 2021, traders fear that we could still have two more long years ahead of us. And these portions of the market cycle can often be very unpredictable. This post by @BitcoinPierre on Twitter does explain some differences, however:
Regardless of reasons (which will always be somewhat subjective), this most recent year saw a -65% price return for Bitcoin, to the disgust of many traders. But now that the New Year has arrived, many are hoping to wipe away the disastrous market cap implosions felt throughout the year, and renew their cryptocurrency faith in what will likely be a very pivotal 2023.
To a certain extent, many experienced hodlers and traders in the cryptocurrency community have argued that this was an inevitability after the historic market cap rises and new all-time highs were made throughout 2020 and 2021.
But this swift and painful downfall has undoubtedly been aided by news stories and unprecedented fundamental events. There have really been four primary events that
rocked the markets:
- COVID-19 (Since March, 2020)
- Inflation & Recession Fears (Since, January, 2022)
- Ukraine & Russia Conflict (Since February, 2022)
- FTX Fallout & Sam Bankman-Fried (SBF) News (Since November, 2022)
These events, above all else, appeared to have each had their place in impacting markets throughout this tumultuous year. Mainly in a negative manner, but certainly not exclusively.
Because of fear related to these issues, along with general stagnancy resulting from the awful 2022 price returns that traders experienced, our NVT models are reflecting that the utility and activity from the two largest networks in crypto has really dried up:
Without active circulation of coins and speculative trades to make crypto networks thriving and active, markets can quickly stagnate and cause a multi-year bear market.
In the same respect, Bitcoin is still not being focused on at the frequency that we deem to be a healthy rate for the rest of crypto markets to thrive. In ideal market conditions, BTC makes up approximately 1/5th of all asset discussions.
For the second half of 2022, this rate mainly ranged between 1/8th to 1/6th of asset discussions instead, which is a night and day difference. As illustrated in the chart above, let’s look to see when trader interest in Bitcoin begins to hover consistently above this break-even line once again. This signal, along with a bit of distrust in exchanges dissipating as time goes by and (hopefully) justice is served against the former FTX founder(s), should be a recipe for a rebound as we head into a new year.
Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.
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