The current cycle Bitcoin has challenge almost all ideas traders rely on identifying the full market cycle. The value has risen slightly over the past two years, but the explosive movement that points to the final stages of Bitcoin’s bull phase has not been there.
According to an analysis shared on X by crypto analyst Sykodelic, the confusion is due to a structural change that distinguishes this cycle from all the great Bitcoin rallies that came before it. The difference is not psychological or technical in the usual sense of a four-year cycle.
Liquidity Differences in This Cycle
The disconnect between Bitcoin’s current price action and the cycles of the past four years has led to questions among crypto analysts on whether the cycle is already high or if something different influences its behavior below.
For example, during the 2020-2021 bull market, Bitcoin’s peak coincided with a period of extreme monetary expansion. Bitcoin followed that flow in a classic parabolic breakout when liquidity conditions reached their most expansive point.
Chart shared by Sykodelic clearly shows this trend. The liquidity index peaked near the peak in 2021 after growing slowly since value expansion in late 2019. This was followed by a fall that coincided with the bear market of 2022, which eventually ended with the bear market at the bottom.
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Interestingly, that pattern of Bitcoin price action following the liquidity indicator has been repeated throughout the previous bullish cycle. In this case, the plot is reversed. The liquidity index did not reach Bitcoin’s recent high above $126,000. Instead, liquidity has been on the rise and has recently begun to stabilize at levels seen during the 2022 bear market.
One of the most unusual aspects of this cycle is how far Bitcoin has come despite limited liquidity support. Sykodelic points out that Bitcoin advanced from around $15,000 to over $100,000 while the global economy was on hold, an unprecedented trend.
Bitcoin/US Dollar. Source: @Sykodelic_ on X
Why Parabola Is Delayed, Not Canceled
The absence of parabolic surgery has led many to think that the cycle is about to run out of steam. However, Sykodelic argues the opposite. According to his definition of the global liquidity index, Bitcoin does not change in the distribution phase of late but. right now it’s bouncing off liquidity trough.
Previous crypto cycles relied heavily on unpredictable cash flows, but this cycle relies on new sources of structural demand. Spot Bitcoin ETFs have it introduce continuous penetration of institutions, while government-level adoption has changed Bitcoin’s role in crypto investment portfolios.
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In addition, the AI-stock boom has led to traditional equity markets a lot of pulling liquidity is available, leaving less money to circulate vigorously into altcoins and the broader crypto market.
The chart shows that the liquidity is starting to go up just like that the air conditioning capacity decreases and liquidity conditions begin to increase. The assumption is that if liquidity starts to increase and devaluation increases, Bitcoin can start a losing behavior that will to new highs.
The featured image was created with Dall.E, a chart from Tradingview.com
