Bitcoin’s Market Cycles: The Influence of Federal Reserve Rate Cuts

The fluctuations in Bitcoin’s market have long been observed to follow cyclical patterns, often tied to halving events. However, one analyst proposes that this year, the actions of the US central bank might hold even more sway over Bitcoin’s trajectory.

Benjamin Cowen, CEO of Into The Cryptoverse, recently speculated on whether the current Bitcoin market cycle is unfolding as expected or if it’s exhibiting what he terms a “left-translated” pattern, where the peak occurs earlier than usual.

Despite being weeks away from the halving event, Bitcoin has already achieved a new all-time high. This has raised the prospect of the cycle peaking much sooner than in previous instances, typically occurring in the year following a halving event.

Cowen suggests that the reaction of Bitcoin markets to any Federal Reserve rate adjustments could be pivotal in determining its trajectory. A pullback following rate cuts might align it with past cycles, possibly leading to a peak in 2025. Conversely, a lack of significant correction or consolidation could indicate a left-translated peak.

The recent meeting of the Fed on March 20 maintained rates at 5.5%, sparking immediate volatility. While the next policy meeting is scheduled for May, market expectations lean heavily towards no change, according to the CME FedWatch Tool.

Drawing parallels between the price movements in 2013 and 2021, with peaks in April followed by another peak in November, Cowen suggests that a similar pattern this cycle could signal a left-translated cycle.

He indicates that if Bitcoin experiences a correction post-rate cuts extending into Q4, without a new mania phase, a standard cycle peak in the post-halving year could be anticipated.

Comparing returns from the current cycle to post-halving years, Cowen suggests that if the peak occurs a year earlier, returns in 2023 might resemble those of post-halving years.

Ultimately, Cowen asserts that Bitcoin’s reaction to rate cuts later this year will be critical in determining the trajectory of this bull market cycle.

Glassnode, an on-chain analytics platform, also drew comparisons to previous market cycles. By both duration and distance from the April 2021 peak, the market is in a similar position to December 2020, relative to the 2018-21 cycle.