- Renowned Bitcoin analysts believe Bitcoin price has hit its bottom based on diminishing cycles theory.
- Analysts identify key indicators that imply BTC is on the verge of bottoming out.
- Guggenheim's Scott Minerd still sees more Bitcoin downside, calls drop to $8,000 in the current cycle.
Bitcoin price has been dominated by bearish sentiment recently, but the BTC trend might be nearing a turnaround. Several leading analysts in the crypto community are arguing that Bitcoin price action has developed in a more irregular manner over the years and diminishing “cycles” imply Bitcoin has bottomed out.
Also Read: Three indicators that tell you when Bitcoin will bottom
Analysts argue Bitcoin price has bottomed out
David Russell is a leading cryptocurrency analyst and trader. Russell (@davthewave on Twitter) has evaluated Bitcoin price trend and performed technical analysis to conclude that Bitcoin price has bottomed out.
Russell argues that Bitcoin cycles have become increasingly shorter, or are “diminishing” with a rise in maturity of the market. Therefore diminishing cycles have replaced four-year halving cycles and, based on this theory, Bitcoin price hit its bottom around $25,000. The analyst has used three technical indicators and models to examine whether Bitcoin price could plummet lower. Russell used the 200-week moving average and noted that Bitcoin price has consistently traded above this level.
The 200-week moving average has acted as support ever since its appearance on the chart, and Russell believes that, given the consistent past performance of Bitcoin price, this level is likely to hold. Therefore, the popular crypto-Twitter analyst is implying that Bitcoin price will bottom around $25,000 and is less likely to drop lower.
Bitcoin price chart, 200-week moving average in orange
On the basis of the Logarithmic Growth Curve (LGC), Russell argues that an 80% price drop in Bitcoin price is highly unlikely. Logarithmic analysis is a statistical approach that takes historical price data in account and develops curves to project a potential path of future price growth.
Bitcoin LGC
On-chain data shows light at the end of the tunnel
Bitcoin Long Term Holders, or SOPR, is an indicator that reflects the degree of realized profit and loss for all coins moved on-chain. It covers a spectrum of Bitcoin with a lifespan of over 155 days. Therefore, it is considered a long-term indicator that represents an aggregate profit or loss multiple realized by long-term holders. If the value is greater than, or equal to one, it implies holders can sell Bitcoin on a neutral level or at a profit. A drop below one implies a loss.
The current value is 0.72, which means some Bitcoin Long Term Holders could sell at a loss. Investors holding Bitcoin for three to twelve months have been known to sell their Bitcoin at a loss. Since the indicator’s value has dropped below one, it indicates a potential Bitcoin bottom formation.
Bitcoin Long Term Holder SOPR (SMA 7)
Institutional demand plummets
Glassnode analysts have also evaluated the Bitcoin price trend and on-chain metrics. Analysts have noted a decline in Bitcoin price performance over the past 12 months as the asset’s long term Compound Annual Growth Rate (CAGR) has taken a hit.
The chart below plots out the rolling 4yr Compound Annual Growth Rate (CAGR) for Bitcoin.
Bitcoin four year Compound Annual Growth Rate (CAGR)
The chart shows there is a decline in institutional demand for Bitcoin, and that the general consensus is that with growing market valuation, the return profiles for BTC can generally be expected to diminish.
Guggenheim Chief believes BTC will crash to $8,000
Scott Minerd, Chief Investment Officer at Guggenheim, is bearish on Bitcoin, predicts a downside target of $8,000 for BTC and expects the bottom to come soon as the US Federal Reserve imposes restrictive policies.
The Guggenheim notable executive has predicted a potential bottom formation in Bitcoin, calling the bottom at $8,000. This implies a 70% drop in Bitcoin price from current levels. Minerd was quoted as saying,
When you break below 30,000 [dollars] consistently, 8,000 [dollars] is the ultimate bottom, so I think we have a lot more room to the downside, especially with the Fed being restrictive.
Referring to the US Federal Reserve's interest rate hike and tightening of monetary policy, Minerd considers it likely that the Bitcoin price could hit bottom. If the Guggenheim Chief Investment Officer's Bitcoin prediction comes true, it could inflict further pain on the crypto market, which has lost $500 billion in market value over the past month.
Minerd's previous price predictions have failed
Scott Minerd told Bloomberg in December 2020 that the Bitcoin price could rally to $400,000 according to Guggenheim's fundamental work on the asset. At the time of this prediction, Bitcoin was trading at around $20,000.
"Our fundamental work shows that Bitcoin should be worth about $400,000," says Guggenheim's Scott Minerd https://t.co/9QyOWyYAVA pic.twitter.com/uojQqaKPia
— Bloomberg TV (@BloombergTV) December 16, 2020
