Kevin Kelly, co-founder and Head of Research at Delphi Digital, argues that the cryptocurrency market is about to enter a new cycle. Drawing on historical data and patterns, Kelly emphasizes the cyclical nature of the crypto market and its consistency.
Kelly points out that the predictability of crypto market cycles is not a coincidence. He outlines a typical cycle using Bitcoin as a reference:
1. Bitcoin reaches a new all-time high (ATH).
2. It then experiences an approximately 80% drawdown, finding its bottom about a year later.
3. It takes roughly two years for Bitcoin to recover to its previous high.
4. A price rally follows for another year before a new ATH is established.
He notes that these cycles usually span around four years and align closely with changes in the business cycle. Bitcoin price peaks often coincide with indications of the Institute for Supply Management (ISM) topping out. Metrics like active addresses, transaction volumes, and total fees have also peaked alongside the ISM.
Kelly believes that the ISM is nearing the end of its two-year downtrend, which is reflected in risk assets. He suggests that the timing of the next Bitcoin halving event will align with the ISM indicating signs of bottoming out, aligning with expectations for a renewed liquidity cycle uptrend.
While Kelly remains optimistic about the crypto marketโs trajectory, he acknowledges potential risks. A modest selloff or price consolidation could occur, especially given the strong rally observed over the past nine months. Another concern is if the business cycle exhibits a false bottom or doesnโt bottom as quickly as anticipated.
Kelly believes that despite challenges faced over the past 18 months, the crypto marketโs outlook for the next 12-18 months appears promising, with several catalysts lining up in its favor.
