Above the trend, between cycles: Sober thinking on Bitcoin's "pullback moment"

Author: Daii Source: mirror

This morning, the price of Bitcoin fluctuated again, falling below the $77,000 mark and currently fluctuating around $80,000. The market seems to have entered the "correction moment" again. Faced with the ups and downs of prices, I believe many friends are thinking about the same question:

Is it "getting off the car to avoid risks" or "entering the market at a low point"?

This question seems simple, but it is actually complicated. Especially in the cryptocurrency market, short-term fluctuations are drastic, and various information noises are intertwined, which can easily make people lose their way. When we are in the "correction moment", we need a calm thinking, to pull our eyes away from the current price fluctuations and put them into the larger "trend" and "cycle" framework to examine.

Admittedly, whether the Bitcoin "car" can continue to move forward is a common question for all "passengers". But as we will discuss today, the key clue to answering this question is hidden in "above the trend and between the cycles".

Today, I will use the framework of "trends and cycles" to help you clear the fog and think about the "pullback moment" of Bitcoin. First, let's start with understanding the basic concepts of "trends" and "cycles".

A picture is worth a thousand words. The following picture can quickly give us a perceptual understanding of "trends" and "cycles". Please note that the vertical axis of the following figure is a logarithmic coordinate, and the height from 0 to 1 is equal to the height from 1 to 10, which is to see the early price changes clearly.

Trend: The red arrow pointing upwards. It represents the long-term upward trend of Bitcoin prices. Will this trend continue? This is the question we want to answer today, and we will talk about it in detail later. Several important long-term indicators will give you confidence in the future of Bitcoin.

Cycle: Four blocks of different colors. They represent different stages of a cycle. The stage division of the first three cycles is relatively clear, but the division of the fourth stage starting in 2023 is not only not completed, but also very controversial. This is also what I need to explain to you today. An important reverse indicator should make it easy for you to make the decision to "get on board".

Through the above charts, I believe you should have a more intuitive perception of trends and cycles. Let's take a closer look at what exactly is a trend? What is a cycle?

1. What are trends and cycles?

To understand any market, we should first distinguish between the two key concepts of "trend" and "cycle", and the crypto market is no exception.

Trend: Trend is the long-term direction of the development of things and a grand and lasting force. It represents the most essential and core direction of things, just like a surging river, which is difficult to reverse once formed.

Cycle: Cycle is the short-term fluctuation in the development of things, which is a rhythmic change around the trend line.

Simply put, the cycle is in the trend. However, simple inclusion is not enough to express the complex relationship between them. If the "trend" is like the trunk of a tree, the "cycle" is like the annual rings on the trunk.

Just as the trunk of a tree determines how high it will eventually grow and where it will grow. However, the growth of trees is not smooth sailing. It will be affected by various factors such as seasons, climate, soil fertility, etc., which will leave "annual rings" marks on the trunk.

The same analogy can be applied to the Bitcoin market.

The long-term trend of Bitcoin is jointly shaped by macro factors such as technological innovation, global adoption, institutional entry, and policy evolution, which determines the long-term upward or downward direction of Bitcoin prices. Once this trend is formed, it is like a river that never stops flowing. Even if the road ahead is tortuous, it is difficult to change its grand direction of finally flowing into the sea.

The short-term cycle of Bitcoin is affected by short-term factors such as market sentiment, macroeconomics, emergencies, and capital flows. It is like the rolling waves in the river. Although it is magnificent, it is ultimately a short-term phenomenon in the long river of trends. In the Bitcoin market, the alternation of bull and bear markets, and the rise and fall of short-term prices, all belong to the category of cycles.

However, many times, we cannot distinguish between trends and cycles. Why is this?

2. Why is it not easy to distinguish between "trends and cycles"?

The reason is simple, but deeply rooted in human nature and the complexity of the market.

The human brain is naturally more sensitive to "change", especially short-term and drastic changes. Imagine that you are standing in a forest. The first thing that attracts your attention is the leaves swaying in the wind and the squirrels jumping on the branches, rather than the towering of the century-old tree. Similarly, in the "digital forest" of cryptocurrency, our brains are more likely to be attracted by daily price fluctuations and be confused by short-term "waves", while ignoring the long-term "rivers" running behind them - long-term trends.

The Bitcoin market in particular is so volatile that it can be called a "storm" in the "digital ocean". It is common for prices to soar or plummet by 10% or even 20% in a day. Under such violent fluctuations, investors' brains are like small boats in the stormy sea, constantly impacted by the huge waves in front of them. How can they have the leisure to take care of the vast ocean currents?

What's more, human nature is naturally averse to losses and seeks profit and avoids harm. When prices fall and accounts shrink, the instinct of "loss aversion" will make us extremely anxious. We just want to "stop loss" and leave the market as soon as possible. How can we care about the "long-term trend"? As prices soar, the desire of "greed" will drive us to enter the market because of FOMO (Fear of Missing Out), fearing that we will miss the opportunity to "get rich quickly", and we will not think calmly, is this the power of the trend, or just the pulse of the cycle?

What's even more strange is that the cyclical fluctuations in the Bitcoin market are usually very confusing. They often "change their faces" and disguise themselves as "trend reversals", making it difficult to distinguish between the real and the fake, and it is difficult to see the truth behind them.

What's more complicated is that the Bitcoin market is full of various "noise" information. These "noises" are like "fog", interfering with our judgment, making it difficult for us to capture the real "signal" - the guidance of long-term trends.

What’s worse is that a lot of “noise” information is usually artificially created. It is a “smoke bomb” deliberately released by market “dealers” or “institutions” to confuse the public and mislead retail investors, so as to achieve their ulterior motives. For example, when the market falls, they will spread all kinds of FUD (Fear, Uncertainty, Doubt) information to create panic and induce retail investors to sell at low prices; when the market rises, they will issue all kinds of optimistic news to create a pleasant atmosphere and attract retail investors to buy at high prices.

Therefore, sometimes we can’t tell whether the current decline belongs to “cyclical correction” or “trend reversal”, which is understandable.

So, what is the current situation of Bitcoin?

Cyclic correction.

In fact, this answer hides an important premise-the general upward trend of Bitcoin has not changed. Is this really the case? This may be the biggest question mark in your mind. So, we should figure this out first. Because only after you figure out where a "ship" is heading, you need to decide whether you should get on the "ship".

3. Why has the upward trend of Bitcoin not changed?

The answer lies in those grand and lasting forces, the cornerstones that shape the long-term trend of Bitcoin. Even in the fog of short-term market corrections, these cornerstones are still as solid as a rock, shining in the direction of guiding trends.

3.1 Global adoption rate: 96% of "no man's land" indicates a broad space for growth

By 2025, only 4% of the world's population will hold Bitcoin.

This data may seem disappointing at first glance, but from another perspective, it contains incredible growth potential!

Imagine a huge market with a population of 10 billion, only 4% of which has been developed so far, and there is still 96% of "no man's land" waiting for us to explore and cultivate. Isn't this an exciting "blue ocean" market?

River's research report also confirms this: Bitcoin has only achieved less than 4% of its maximum adoption potential. This means that the global popularity of Bitcoin is only in its "infancy", and there is still a long way to go in the future, with extremely broad room for growth.

It is particularly noteworthy that developing countries and regions will be the main force for the growth of Bitcoin adoption in the future. The report shows that North America is currently the region with the highest Bitcoin adoption rate, while Africa's adoption rate is only 1.6%. This just shows that Bitcoin still has huge room for popularization in economically underdeveloped regions.

So what does this global adoption rate of just over 3% mean? River's report gives an analogy, see the figure below.

Such a low adoption rate is equivalent to the Internet in 1990, online banking in 1996, and social media in 2005. In other words, this is an era full of opportunities. Even if you haven't gotten on board yet, it's not too late. Taobao is not the first to do e-commerce, Google is not the first to do search, and Netflix is ​​not the first to do online video.

Everything is just beginning. This 96% "no man's land" will be the most solid "demographic dividend" for Bitcoin's long-term upward trend!

3.2 Troika: Institutional Entry + Clear Supervision + National Reserve

Bitcoin, which was once "sneered" by traditional financial institutions, has now become a "hot commodity" that they are vying for.

Standard Chartered Bank predicts that the price of Bitcoin will reach $500,000 during Trump's term, and clearly points out that "the growth of institutional adoption" is one of the key driving factors. Geoffrey Kendrick, head of digital asset research at Standard Chartered Bank, believes that the participation of institutions will not only reduce the volatility of the crypto market, but also enhance the security of the market. In addition, Standard Chartered is also the only institution that has accurately predicted the current bottom of Bitcoin - 69,000 to 76,500. Standard Chartered believes that another driving factor is the establishment of a clearer regulatory framework in the United States. The Trump administration not only established a "strategic Bitcoin reserve", but also actively promoted stablecoin legislation. U.S. Congressman Bryan Steil publicly stated that the United States has huge legislative opportunities in blockchain technology, Web3 and cryptocurrency. Steil currently serves as the chairman of the U.S. House of Representatives Digital Assets, Fintech and Artificial Intelligence Subcommittee. CoinShares' research report also pointed out that the establishment of a strategic Bitcoin reserve in the United States will have a more profound long-term impact on the adoption of Bitcoin than the launch of an ETF. The current market seriously underestimates the value of the United States' strategic Bitcoin reserve, and is more trapped by short-term liquidity. For a more detailed interpretation, I recommend you to read "Digital Fort Knox: The White House's Conspiracy to Lock Up 190,000 Bitcoins".

In Europe, banks such as DekaBank have begun to support cryptocurrency transactions, and Boerse Stuttgart Digital is also actively promoting institutional-level applications of cryptocurrency. All this indicates that institutional funds are accelerating into the Bitcoin market, and traditional financial giants are "running into the market."

As regulatory policies become clearer, the share of Bitcoin held by institutions and countries will become larger and larger, becoming the dominant force driving the long-term rise in Bitcoin prices.

3.3 Macro-optimism: PMI and M2 point to "positive reversal"

Although in the short term, the Trump administration's tariff policy and the strengthening of the US dollar index have brought certain "headwinds" to the Bitcoin market. However, from a more macroeconomic and policy perspective, the long-term upward trend of Bitcoin is still strongly supported.

The U.S. manufacturing PMI has entered expansion mode (greater than 50) for two consecutive months, which is seen as a signal of a "positive reversal of the business cycle." Raoul Pal, founder of Real Vision, pointed out that the PMI is about one month ahead of the economy, and it is not just ahead of the economy, it is ahead of all assets. He believes that with the upward trend of the business cycle, Bitcoin is expected to peak at the end of 2025 or even early 2026.

S&P Global Market Intelligence's research supports Pal's point of view, see the figure below. You will find that when the PMI on the right is greater than 50, GDP will grow to varying degrees. The study believes that the PMI data predicts "every turning point in earnings over the past 14 years."

Another indicator worth paying attention to, the global M2 money supply, has also shown a "sharp rise" trend. Real Vision's research shows that the price of Bitcoin usually reflects changes in global M2 in about 10 weeks.

Analyst Colin Talks Crypto even accurately calculated the "46-day and 72-day lags" of global M2 changes affecting Bitcoin prices through data analysis. Lyn Alden also pointed out that "Bitcoin moves in the same direction as global liquidity 83% of the time during any given 12-month period, making it a powerful barometer of liquidity conditions."

This means that improvements in global macro liquidity will provide a strong "boost" to the rise in Bitcoin prices.

3.4 Summary: Three cornerstones of Bitcoin's long-term trend

Bitcoin's long-term upward trend has not changed, and the core support comes from three irreversible macro forces:

96% of the blue ocean market: Currently, only 4% of the world's Bitcoin holders, and the adoption rate in developing countries is less than 2%. Its penetration rate is equivalent to the Internet in the 1990s, and its growth potential far exceeds the short-term market fluctuations.

Institutional and national strategic entry: Standard Chartered Bank predicts that Bitcoin may reach $500,000 during Trump's term, the United States is establishing a "strategic Bitcoin reserve" and accelerating stablecoin legislation, and European banks such as DekaBank have opened cryptocurrency transactions, forming a triple thrust of "institutions + supervision + sovereign reserves".

Macrocycle resonance: The continuous expansion of the US PMI indicates a reversal of the business cycle. The global M2 growth rate has a 46-72 day lag correlation with the Bitcoin price. The loose liquidity and the "digital gold" attribute of Bitcoin form a long-term synergy.

Therefore, the short-term 77,000 callback is just a cyclical wave, and the river of the trend is still rushing forward. So, has the price of 77,000 hit the bottom? Is it a good time to enter the market now?

In fact, if you agree with my argument about the trend above, the answer is self-evident. Although you may not be able to buy at the lowest point, you will not buy at the high point. The only thing you need to control is your desire, and don't add too much leverage.

Conclusion: Be friends with time and dance with trends

History will not repeat, but it always rhymes. When gold flowed from the Americas to Europe, it created the myth of wealth in the Age of Exploration; when the Internet went from the laboratory to thousands of households, it reshaped the way human civilization connects - today, we are standing at the forefront of the digital asset revolution, witnessing the epic leap of Bitcoin from code to a global value carrier.

When 96% of the world's population does not yet hold Bitcoin, when sovereign funds begin to include crypto assets in their balance sheets, and when blockchain technology becomes a new battlefield for great power competition - this galloping "digital ark" has just sailed out of the dock where it was built.

The secret to dancing with the trend is not to predict the shape of the waves, but to understand the rhythm of the tide. Those investors who held on to Amazon when the Internet bubble burst, and those visionaries who heavily invested in Apple in the embryonic stage of mobile Internet, all know a truth: trends are never smooth straight lines, but rising spirals composed of countless periodic fluctuations. Just as the fluctuation of $77,000 at this moment is just a short chord in the symphony of crypto civilization, the main melody always rises to the height of trust built by hash computing power.

Real dancers never need spotlights to illuminate the entire road. When 96% of the audience is still watching from the audience, when sovereign funds begin to adjust the rhythm of their dance steps, smart people have already marked their own notes on the music score of blockchain - maybe they will step on the wrong beat, maybe they will stumble for a short time, but as long as their feet are always on the crustal movement belt of technological revolution, they will eventually witness the reassembly of the financial continental shelf.

Trends are the sea, cycles are the boats, fools calculate the height of the waves, and wise men calibrate the angle of the sails. Trends determine the overall direction of the market, and cyclical fluctuations are short-term phenomena that fluctuate along the trend. When the dusk of the legal currency system meets the dawn of the crypto economy, instead of chasing shadows in the K-line maze, it is better to jump into the torrent of digital civilization and board the ark held up by the tide of the times.

Every callback at this moment is a ticket reserved by history for those who are sober.