After BTC’s violent pullback in the first quarter, will it replicate the trend of 2017 next?

Author: Bitcoin Magazine Pro Team

Compiled by: BitpushNews

Bitcoin has entered a continuous downward trend after breaking through $100,000 to hit an all-time high. This price correction naturally triggered the market's doubts about whether Bitcoin still follows the 2017 cycle law. This article will use data analysis to evaluate the correlation between the current Bitcoin price trend and the historical bull market cycle, and look forward to the possible future development path of BTC.

Will the trend in 2017 be reproduced?

Since the 2022 bear cycle lows, Bitcoin’s price trajectory has shown striking similarity to the 2015-2017 cycle, which eventually hit a historic bull market of $20,000 in December 2017.

However, the recent downward trend of Bitcoin marks the first time its trend has shown a significant deviation from the 2017 cycle. If the 2017 model is strictly followed, the past month should have been a rising period when Bitcoin hits another high, but the actual market has shown sideways consolidation and downward trend, implying that the correlation between the two cycles may be weakening.

 Figure 1: The current cycle trend trajectory has deviated from historical laws recently 

Despite recent trend differentiation, the historical correlation between the current Bitcoin cycle and the 2017 cycle is still at an abnormally high level. Earlier this year, the current cycle was about 92% related to the 2015-2017 cycle. Recent price deviations have slightly reduced the correlation to 91%, which is still at an extremely high level in the financial market.

Investor behavior analysis

The MVRV ratio (market value to realization value ratio) is a key indicator for observing investor behavior and is used to measure the relationship between the current market price of Bitcoin and the average cost price of all BTC holders on the chain.

When the MVRV ratio rises sharply, it indicates that investors' book floating profits have expanded significantly, which often indicates the formation of the market top; and when the ratio falls to the realization price, it means that the price of Bitcoin is close to the average holding cost of investors, which usually marks the market entering the bottoming stage.

 Figure 2: MVRV ratios remain similar to the 2017 cycle 

Latest news on MVRV ratios

The recent decline in MVRV ratio reflects the current situation of Bitcoin's pullback from historical highs, but its overall structure remains similar to the 2017 cycle - the early bull market surge was accompanied by multiple deep corrections, so the correlation between the two remains at 80%.

Data lag effect

One possible reason for the current trend differentiation is the impact of data lag. For example, Bitcoin price trends are highly correlated with global liquidity (the total money supply in major economies), but historical data show that liquidity changes usually take about two months to be reflected in the price of Bitcoin.

 Figure 3: Global M2 money supply has a lagging conduction effect on Bitcoin price 

Lag effect verification

If the current Bitcoin price trend is processed with a 30-day lag with the 2017 cycle, the correlation between the two will rise to 93%, becoming the highest correlation value since records were recorded in the two cycles. This lagging adjustment trend pattern suggests that Bitcoin may return to its 2017 trajectory soon, meaning a strong upward trend may be coming.

 Figure 4: Price trends are still highly consistent with the 2017 data after 30 days of lag processing 

Core conclusion

History will not be simply repeated, but there are often similar rhymes. The current Bitcoin cycle may be difficult to reproduce the exponential surge in 2017, but the deep psychological mechanisms of the market still show amazing similarity. If Bitcoin resumes reconnection with the lagging 2017 cycle, historical rules show that Bitcoin may soon recover from the current adjustment and usher in a breakthrough rise.