Bitcoin’s Next Price Cycle

Bitcoin and cryptocurrency prices have continued to track sideways over the last month and bitcoin is now down around 50% from its April peak. The price has made several attempts to break out of its current cycle, failing to establish clear higher highs and higher lows. The prices, up strongly over the last couple of days, appear to be coiling, ready to make a decisive move for the next round of trending action.

Bitcoin's retracement from the peak to trough, is currently around 45%. The previous bear market in 2018 reached a drawdown of 80%. Typically, bitcoin suffers sharp but quick drawdowns before a bear market similar to 2017 and earlier this year. Eventually, sellers gain control as price shifts from an uptrend to a downtrend.

For now, some analysts expect bitcoin to remain in a range of between $30,000 US and $40,000 US for the next few weeks, before making a more decisive move. A vast majority of experts believe this decisive move will be to continue the bull run.

The reason for the latest bitcoin price retreat has been pointed to China's latest crackdown on bitcoin and crypto miners. Michael Saylor has warned China's suspension of bitcoin and crypto miners could be a "trillion-dollar" mistake.

"I think, given the bitcoin growth rate, this will prove to be a trillion-dollar mistake for China," said Saylor, pointing to China's "50% bitcoin market share" and bitcoin growing "100% year-over-year."

"It's a tragedy for Chinese miners [and] it's a geopolitical mistake for China the country—but I suppose they could afford to make a trillion-dollar mistake."

The bitcoin price has also been hit over recent weeks with Elon Musk's concerns over bitcoin's energy use. Elon's comments wiping sparking an over $1 trillion reduction in the combined cryptocurrency market.

Until recently, China was thought to have provided over 50% to bitcoin's mining capacity but last month bitcoin mining operations were ordered to shut down their work. It is believed that over 90% of bitcoin mines in China were shuttered last weekend, sending the bitcoin price into a sharp sell off.

"It's a nuisance and a dislocation for bitcoin in the near term, you can see the trading volatility," said Saylor. "A lot of Chinese had to sell bitcoin under forced liquidations and with a timeframe because they had to get out of the country and all their loans got pulled—so that's been a big opportunity for Western investors."

The U.S. has emerged as one of the primary destinations for bitcoin miners fleeing China. Last week, Miami mayor Francis Suarez said he's working to lower the cost of electricity to attract bitcoin miners to establish their operations in Florida.

"It's a great windfall for North American bitcoin miners whose costs are the same and they're going to generate 50% or 75% more revenue for a while because the China business has been taken offline," said Saylor.

Last week Microstrategy revealed it now owns more than 100,000 bitcoins after completing yet another bitcoin purchase, this time spending just under $500 million on roughly 13,000 coins—though Saylor said he'd have been willing to pay a lot more.

"Companies like mine bought bitcoin in the $30,000 range, we'd have paid double or even triple if it hadn't been for the China exodus, so we got a benefit from that."

Despite bitcoin's price turmoil over recent weeks, Saylor remains very bullish about bitcoin's prospects saying, "Biden being elected president was good for bitcoin, Gary Gensler taking over the [Securities and Exchange Commission] was good for bitcoin."

Saylor has also shared his opinion that he expects a long-awaited U.S. bitcoin exchange-traded fund (ETF) to eventually be approved which could have incredibly positive effects on the Bitcoin price.