2020 – 2021 has been the year of crypto there is no denying that. From the lows of around 4k last March to Bitcoin being up more than 10X to ~60k currently it has been probably the greatest investment the average investor could have made in the past year time frame. As the crypto market continues to swell, the obviously question that many investors, new and old, are asking… When will it end? Well the answer is not so clear, the market still has tremendous upside but crypto is crypto and massive swings are still on the table. As much as we all want this party to keep going it will end and as tremendous bullruns have been and currently is, it might end badly for any new investors piling in right now.

In this DD, I wanted to explore the historic market of Bitcoin, and why in today's bullrun, we're starting to hit levels where taking profit to protect yourself might not be a bad idea.

Examining the past rises and falls

Bitcoin has "crashed" a multitude of times in the past and every time it's declared dead.

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Yep, nothing to see here bitcoin is dead

As we all know right now, bitcoin is not dead. In fact, the price suggests that it's more alive than ever, with people willingly to pay more than the price of a new Tesla to get their hands on just one bitcoin. However, Bitcoin has horribly crashed in the past. Wiping out greedy investors who've piled in at the peaks. As of today, there's been a multitude of "flash crashes" with 2-3 big ones (if you count the Jun '11 crash):

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This is an older image as you can tell, the end date of the most recent crash in '17 is probably some time March '19

I don't know now if investors from '17 are now considered old but I remember crypto spent the entire '18 in decline finally bottoming around 3000-4000. It was a pretty bad time to be long on Crypto, it seemed like it would just continue spiraling downward with no hope of it ever recovering. A decline of 80-85%! I'm sure a lot of investors felt aged from that decline. Caught in the ICO frenzy, huge sums of money were just thrown in random garbage shitcoins (DeepBrainChain anyone?). "It's just a fad, fuck this crypto is died". This statement is true a lot of coins absolutely have died since their '17 runup:

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Vertcoin bagholders in shambles

However, Bitcoin has not only survived but exploded tremendously. Bitcoin crashes have always been a spectacular sight to behold. At bitcoins current price another 80% decline would spin the price down to around 12k. "Dude if bitcoin goes below 30k, I'm going all in", I hear you say. Well something to be aware of is with these massive declines, is that they take time. The price downtrends for a long time sometimes over a year. People buying along the way down lose hope as they see the money they keep throwing in just evaporating. Humans are very twitchy animals, one year is a long time at the same time as being a short time to us. There's no reason to believe the next downtrend is no different. Bitcoin is cyclically, there are boom and busts even if you are omega bullish on it and believe it's going to $1M USD, there's no such thing as a parabolic line. The next downtrend will very likely follow the same patterns as laid out before.

Let's examine the last two big rises and falls to get a sense of how much bitcoin tends to increase on each run.

Spring 2013:

High: $230

Fall 2013:

High: $1,128

2017 cycle:

High: $19640

2021 cycle:

High ????

The 2013 cycle saw a percentage gain of 390%, with the 2017 cycle seeing a 1641% percentage gain. It remains to be seen how high we can currently go but we're sitting right with a nice 200% percentage gain from the last ATH. Hopefully we have room for another 200% gain.

The current market state

Bitcoin is starting to reach overheated levels, price-wise. Let's take a look at it's stock to flow model:

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Wow! Much correlation?

Stock to flow has been relatively accurate time frame wise in calculating the rise of bitcoin and when bull runs approximately start. As we can see this one is coming close to ending. The last rise wasn't entirely accurate with Stock to Flow suggesting a $5000 price tag around July of '17, instead we saw a peak of $19k around Dec. But relatively speaking it's a good way to measure the timing of cycles.

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HMM

Let's examine one of my favorite charts, the 2-Year MA Multiplier. With a 2-year Moving Average as the bottom line and a 2-year Moving Average x5 as the top line. It's been a great way to measure when the market gets too overheated and conversely, also when Bitcoin is a great buy. As we can see we're starting to reach dangerous levels in this current peak. As such, it might be wise to be ready to take some profits, if the trend of bitcoin taking massive 80% dives after ultimate exuberance continues.

Market cap is also another huge factor in pricing of Crypto. Bitcoin moving from 30k to 60k is the same percentage gain as it moving from 60k to 120k. But the money that is required to push it is far greater. At 30k, the market cap is roughly 550B, at 60k, 1.1T, and at 120k, 2.2T. As you can see it takes far more money to continue to push the price higher and higher.

B-But this time is different!

History doesn't repeat itself, but it often rhymes. Cryptocurrency is no different. Yes it is a transformative innovation, yes it's worth a staggering 1.7T right now. And yes, more and more companies and investors have been piling into it seeing the price rise. And I'm sure you notice I just mainly refer to Bitcoin in this post. As much as Eth Maximists (like myself) want the flippening to occur, Bitcoin is still king and Bitcoin still will move the market in either direction.

Bitcoin actually peaked earlier by a few weeks compared to Ethereum in '17

Good times

For a brief period in time, Ethereum looked like it might be ready to flip Bitcoin, but as we all know now the cryptocurrency market just absolutely nuked itself and that never happened. As time has shown, Bitcoin has a massive dominance over the market, around 60% today (like it or not) and it's price movement has and still can influence the price of all other cryptos. What's important to realize from this is that if Bitcoin falls, the rest of the market will with it.

The closest we ever got to the flippening

For this reason, I like using Bitcoin as the ultimate gauge for the bullruns health and levels when to start scaling out during this bullrun.

The next bullrun

"I'll sell now and buy back when it's cheap!" I also hear you say, your mouth full of Cheetos. Well it's not a terrible idea to take profits along the way up. That's why I've written this DD. As we've seen the market has often repeated itself, with massive dives that completely tank the price after it becomes too overheated. There is no reason to believe this current bullrun is any different. If we follow the Stock to Flow model, the next bullrun looks to start around 2024? Plenty of time to let the market cool and for people to lose interest once again.

Just remember investing in Crypto is a marathon not a sprint. This is 100% an innovation that is here to stay and will change the world. Investing today is still early. However, it is important to look at the both the past and current market trends and be aware of the risks of believing that "Crypto only goes up". This bullrun is still going, it might continue all throughout 2021. Who knows? But taking steps to protect yourself, is key.

Edit:

I'm including my favorite graph the Pi Cycle Indicator:

Squints extremely hard

It has been extremely effective in predicting the local tops of the last three cycle tops in Bitcoin. As of today:

Uh oh

Despite the overwhelming bullishness of the market, it looks like another pi cycle top is going to be hit soon. Will the trend of calling the localized top hit? Maybe, but it's been right so far. And it's much closer to looking like it will cross over in the coming future than farther out… Additionally I recommend looking at the other graphs on LookIntoBitcoin.com, there's a lot of very intriguing graphs that show we might be closer than farther from a top in this current bullrun.