Bitcoin's Long-Term Cycle May Be Near Bottom

Bitcoin's recent price action has some analysts suggesting that it may be near the bottom of its long-term cycle. According to Blockworks Research, the cryptocurrency is currently down 50% from its all-time high and has been in a bear market for over 40 weeks.

The report points out that several historical indicators are flashing warning signs, including a historic oversold level against the Nasdaq Index and gold. In February of this year, Bitcoin hit a historic oversold level against gold, a signal that typically precedes strong performance and positive returns for Bitcoin over the next 1-3 years.

The actual price of Bitcoin, which estimates the total on-chain cost basis of all circulating Bitcoin, is currently $53,000 - 18% lower than the spot price. Historically, every bear market low in Bitcoin spot prices has occurred below the actual price, and after entering this zone, prices have typically continued to decline before reaching a bottom.

Blockworks Research notes that diminishing returns are a key characteristic of Bitcoin's long-term cycle, with each cycle delivering lower marginal returns. The report also highlights the importance of conditional investing, as passive, always-long strategies are no longer effective in achieving excess returns.