Thread by @Kevin_Kelly_II

The crypto market is highly cyclical.

Crypto market cycles are also remarkably consistent.

But their consistency isn’t just by coincidence.

They’re predictable.

If we're right, this has huge implications for the crypto market going forward.

Time to air out some charts... 👇

Evidence is piling up that we're in the early stages of a new cycle

Risk assets like stocks + crypto have been sniffing this out all year (as we've been noting @Delphi_Digital)

This isn't just another bear market rally IMO

Stick with me here cause it'll all come full circle...

To outsiders, crypto may look like it lacks any rhyme or reason

But crypto markets are actually quite cyclical

They’re also surprisingly consistent in their:

- Timing btwn peak-to-trough bottoms
- Recovery time to prior cycle highs
- Timing of price rallies to new cycle tops

Using $BTC as a benchmark, a typical cycle looks like this:

- BTC hits new ATH
- Suffers ~80% drawdown, bottoms 1yr later
- Takes ~2yrs to recover to prior high
- Price rallies for another year before reaching new ATH

The last few cycles followed this blueprint almost exactly…

Each of these cycles typically lasts ~4 years

But their length and consistency isn't random

Each of these cycles have lined up almost perfectly with cyclical changes in the business cycle...

BTC price peaks occur around the same time the ISM shows signs of topping out

Active addresses, total transaction volumes, total fees – they all peaked alongside tops in the ISM too

As the business cycle shows signs of recovery, so too does network activity levels...

In fact, BTC's YoY% change usually shows signs of a reversal near bottoms in the ISM YoY

And so far, that's exactly what we've seen this time around...

What's also remarkable is how closely the ISM has tracked the trajectory of its prior cycles, including the timing of its peaks and troughs

This is the real kicker IMO

Every 3.5 years its rinse and repeat, like clockwork…

Higher rates, "sticky" inflation, and recession worries have all contributed to a general apathy toward risk assets this year

But markets are forward-looking, and heading into the year equities were already pricing in a significant slowdown

...if not a full-blown recession

Turning points in the business cycle have historically been ripe opportunities to increase risk exposure

And it looks like the ISM is nearing the final stages of its two-year downtrend

Which again risk assets have been sniffing out...

Therefore, I believe we're more likely in an environment akin to one like 2015-2017

The more I stare at the charts, the more I believe this scenario is the highest probability one given where we are atm (no crystal ball and no guarantees ofc)

There's a few reasons for this...

For starters, let's just look at how the market has been trading

The SPX has been tracking its 2015-17 price action almost to a tee, including the timing of its double bottom...

I remember all the doomsday calls back in 2015-16 and how widespread the uncertainty was

Risk sentiment had soured, earnings were expected to take another hit, and many were calling for an even bigger selloff (even after global equity benchmarks had tumbled into a bear market)

Fast forward to today – there’s been plenty of uncertainty around a recession cutting off the head of a rally in risk

But if you look under the hood, we’ve been in an earnings recession for a couple quarters now (similar to 2015-16)

At the time, the outlook for global growth had also turned bleak

Part of the reason was the US dollar was coming off its strongest surge in 15 years

Again, similar to what we saw in 2021-2022...

Interestingly gold is also tracking its price action around that period too

Gold = hedge against currency debasement

Gold is heavily influenced by things like changes in global liquidity cycles, USD weakness, etc.

Again we find some notable parallels here

GL peaked in '14, contracted thru '15-16, then con't its uptrend

GL peaked in '21, contracted in '22, and bottomed in Q4 '22

...which also marked the bottom in risk assets (e.g. stocks/crypto)

So what’s this all got to do with crypto? Everything.

Because crypto market cycles are tied to bigger macro cycles (like cyclical changes in the business cycle as we noted)

And the cherry on top all this is one that's close to the heart of the crypto faithful...

The Bitcoin Halving is expected to occur in April 2024

The last two halvings both occurred:

- ~18 months after BTC bottomed
- ~7 months before BTC broke to a new ATH

If BTC follows its usual cycle playbook, that implies a new ATH by Q4 2024 (and a new cycle peak by Q4 2025)

And just like prior cycles, the timing of the Halving couldn't be better

It's on track to occur at one of the most opportune times -- after indicators like the ISM show signs of bottoming

And in line with expectations for a renewed liquidity cycle uptrend

Rinse and repeat...

Now obviously I’m biased here, and there’s no guarantee any of this actually plays out how I think it will

Maybe I’m wrong, or maybe I’ve just been drowning myself in too many Bloomberg screens for too many hours

But the more I stare, the more the dots appear to be lining up...

That is why I believe the market will directionally follow a similar path as prior cycles – and again it's not just by coincidence

But just because the longer term outlook is getting brighter doesn’t mean we can’t – or won’t – suffer more corrections...

This is actually around the time when we could see another modest selloff or period of price consolidation, especially after the strong rally we’ve seen over the last ~9 months (similar to 2H 2019)

Another notable risk is if the business cycle exhibits a false bottom (like we saw back in Mar. 2020) or doesn't bottom as quickly as anticipated

Here's a little more context from the in-line comments of our latest deep dive report...

Crypto markets have battled a lot of "heavyweight narratives" over the last 18 months

But if we look beyond the short-term trade, the outlook for the next 12-18 months is significantly brighter from where I'm sitting

The catalysts are stacking up...

Our research at @Delphi_Digital covers these topics in far more detail

DM @Delphi_Digital for an exclusive promo code to get access to our entire report database + real-time updates & opinions/analysis on critical trends driving crypto markets & major sectors

Until next time...