On-chain data reveals trend of shorter bull cycles

The latest Bitcoin (BTC) pricing and on-chain data suggest traders may have to adapt to shorter bull cycles. Despite the lack of a significant drawdown, BTC rallies are also happening faster. 

Periods of bullish elation are becoming shorter, as indicated by both price action and on-chain data. The current period of expansion showed much shorter stages from accumulation to market peak. 

Bitcoin (BTC) can still rally from $53,000 to above $57,000 in a single day, supported by more than $118B of Tether (USDT) and additional fiat and crypto pairings. Yet the cycles of peaks and drawdowns may be happening closer together. 

The 2024 bull market happened in an already mature ecosystem, lacking the almost exponential adoption and wallet growth of previous cycles. This time, the role of whales and experienced traders meant BTC was behaving as a controlled market rather than being in a period of price discovery with new buyer inflows. 

BTC price moves coincide with low on-chain activity

Despite achieving an all-time high in 2024, BTC also goes through relatively low on-chain activity. There is a slow trend of decline in active wallets, with fewer needs to transact in actual coins on-chain. BTC is also abandoned as a tool for payments, replaced by stablecoins. The growth of new BTC wallets was also slower in 2024 despite the inflow of Ordinals and Runes. 

Based on the 21-week moving average, BTC is already in bear market territory. The $61,100 21-week EMA has been abandoned, and BTC has trouble returning above $58,000. For now, BTC is already winding down from its last short-term rally above $64,000. 

In the short term, the ETF drawdowns are sending a bearish message. New stablecoin mints do not always correlate with BTC price action, as, for instance, TRON-based USDT is redirected to other markets. The supply of FDUSD, which is correlated with Binance activity, has also fallen by another 200M tokens in the span of a week. 

During the recent price volatility episodes, short-term traders have finished attacking both short and long positions. Whales also jump in during the lows, buying and consolidating self-custodied coins. 

The current cycle is also different in that most of the BTC holders are way above their cost basis. The cost basis during the 2024 rally hovers around $31,154. Bear markets have also shortened historically, suggesting the current drawdown may be temporary and quickly give way to more bullish trading. 

Traders during this cycle also abandon irrational bullish attitudes more readily by taking profits and waiting on the sidelines. Any catalysts then can trigger a much faster reaction, with inflows from both whales and small-scale buyers. 

Since its March peak at $75,000, BTC is going through a period of choppy sideways trading, but with enough buyers waiting on the sidelines to stage another move to an all-time high. BTC also saw an anomalous crash on August 5, caused by the unraveling of the Japanese yen carry trade. The recent price action also broke down the expectations of a continuous rally to a new peak above $140,000. 

Altcoin season delayed as Ethereum (ETH) loses dominance

Despite the recent BTC drawdowns and sideways price action, data reveals that the altcoin season has been delayed once again. Ethereum (ETH) shrank its dominance to 14% of the total market capitalization, also dragging down Solana (SOL). 

Most altcoins are still down in BTC terms, with only occasional rallies. Buyers no longer trust altcoins for sustained, liquid rallies; instead, they prefer meme tokens for short-term gains. 

The Altcoin Season index is at 27 points, despite the expectations for an altcoin summer. An index of 75 would usher in the altcoin season. For now, even strong narratives have failed to sustain rallies. Previous cycles also held confidence that some of the altcoins could displace BTC, fueling irrational price discovery.

Usually, the altcoin season follows the downturn of BTC. This time around, altcoins in the top 100 barely outperformed BTC. To call an altcoin season based on CoinMarketCap data, more than 75% of assets must outperform BTC. For altcoins in 2024, sluggish demand, combined with insider selling, stalled the expected rally even before it started. 

 In 2024, more traders noticed that altcoins rarely recovered their previous all-time highs. Altcoin seasons also last for a bit above six weeks, ending in years-long bear markets. During the 2024 cycle, some of the older coins never returned, and traders took quick profits on the new trends and narratives.

Cryptopolitan reporting by Hristina Vasileva