Author: Daii Source: mirror

This morning, the price of Bitcoin experienced another fluctuation, falling below the $77,000 mark and currently oscillating around $80,000. The market seems to have entered a "correction period" once again. Faced with the price fluctuations, I believe many friends are pondering the same question:

Is it time to "get off the car and hedge" or "enter the market at a low price"?

This question seems simple but is actually complex. Especially in the cryptocurrency market, short-term volatility is severe, and various information noises are intertwined, which can easily make people lose their direction. When we are in the "correction period", we need a calm reflection, to detach our gaze from the current price fluctuations and examine them within the broader framework of "trends" and "cycles".

Indeed, whether this "car" of Bitcoin can continue to move forward is a common concern for all "passengers". But as we will discuss today, the key clues to answering this question lie "above the trend and between the cycles".

Today, I will use the framework of "trends and cycles" to clear the fog and have a cool-headed reflection on the "correction period" of Bitcoin. First, let's start by understanding the basic concepts of "trends" and "cycles".

A picture is worth a thousand words. The chart below can quickly give us a sensory understanding of "trends" and "cycles". Please note that the vertical axis of the chart is a logarithmic coordinate, where the height from 0 to 1 is equal to the height from 1 to 10, in order to see the price changes in the early stage clearly.

Trend: The upward red arrow. It represents the long-term upward trend of Bitcoin prices. Will this trend continue? This is the key question we will answer in detail later. Several important long-term indicators will make you full of confidence in Bitcoin's future.

Cycle: The four different colored blocks. They represent the different stages of a cycle. The stages of the first 3 cycles are relatively clear, but the division of the fourth stage starting from 2023 is not only incomplete, but also highly controversial. This is also what I need to explain to you in detail today. An important contrarian indicator should make it easy for you to make the decision to "get on the car".

Through the above chart, I believe you should have a more intuitive perception of trends and cycles. Now let's carefully understand what is trend and what is cycle.

1. What are trend and cycle respectively?

To understand any market, we should first distinguish the two key concepts of "trend" and "cycle", and the cryptocurrency market is no exception.

Trend: Trend is the long-term direction of development of things, a grand and lasting force. It represents the most essential and core direction of things, like the endless flowing river, once formed, it is difficult to reverse.

Cycle: Cycle is the short-term fluctuation in the development process of things, a rhythmic change that oscillates above and below the trend line.

In simple terms, the cycle is within the trend. But a simple inclusion is not enough to express the complex relationship between them. If we compare "trend" to the trunk of a tree, then "cycle" is like the annual rings on the trunk.

Just as the trunk of a tree determines how high it can ultimately grow and in what direction, the growth of a tree is not smooth sailing, it will be affected by factors such as seasons, climate, and soil fertility, and these influences will leave "annual rings" on the trunk.

By analogy to the Bitcoin market:

The long-term trend of Bitcoin is shaped by macrofactors such as technological innovation, global adoption, institutional participation, and policy evolution. Once this trend is formed, it is like a flowing river that, although the path ahead may be winding, is difficult to change its grand direction of eventually flowing into the sea.

The short-term cycle of Bitcoin is affected by factors such as market sentiment, macroeconomic conditions, unexpected events, and capital flows, like the rolling waves in the river, although they are majestic, they are ultimately temporary phenomena in the long river of the trend.

However, many times we cannot distinguish what is the trend and what is the cycle. Why is that?

2. Why is it not easy to distinguish "trend and cycle"?

The reason is simple, but deeply rooted in human nature and the complexity of the market.

The human brain is naturally more sensitive to "changes", especially short-term and drastic changes. Imagine standing in a forest, the first things that catch your eye are the swaying leaves in the wind and the jumping squirrels on the branches, not the towering centuries-old tree. Similarly, in the "digital forest" of cryptocurrencies, our brains are more easily attracted by daily price fluctuations, by the "waves" of the short term, and neglect the "river" of the long-term trend flowing behind.

Especially in the Bitcoin market, the volatility is so severe that it can be called a "digital ocean" with "storms and heavy rains". A price surge or plunge of 10% or even 20% in a single day is commonplace. Under such violent fluctuations, the investor's brain, like a small boat in the raging waves, is constantly battered by the towering waves in front of it, where would it have the leisure to care about the vast ocean currents?

Moreover, human nature inherently hates losses and seeks benefits. When the price drops and the account shrinks, the instinct of "loss aversion" will make us extremely anxious, just wanting to "stop loss" and exit the market, where would we care about the "long-term trend"? When the price surges, the desire for "greed" will drive us to enter the market due to FOMO (Fear of Missing Out), afraid of missing the opportunity to "get rich", and we will not calmly think about whether this is the power of the trend or just the pulsation of the cycle.

Even more insidiously, the cyclical fluctuations in the Bitcoin market are often highly deceptive, they often "change faces" and disguise themselves as "trend reversals", making it difficult to distinguish the true and the false, and to see the real truth behind them.

Even more complex is that the Bitcoin market is full of all kinds of "noise" information, these "noises" are like "fog" that interfere with our judgment and make it difficult for us to capture the real "signal" - the guidance of the long-term trend.

Even worse, much of the "noise" information is often deliberately manufactured, released by the "big players" or "institutions" in the market as "smoke screens" to confuse and mislead retail investors for their own nefarious purposes. For example, when the market is falling, they will spread various FUD (Fear, Uncertainty, Doubt) information to create a panic sentiment and induce retail investors to sell at low prices; while when the market is rising, they will release various optimistic messages to create a pleasant atmosphere and attract retail investors to buy at high positions.

So it's understandable that we sometimes can't tell whether the current decline is a "cyclical correction" or a "reversal of the trend".

So what is the current situation of Bitcoin?

A cyclical correction.

In fact, this answer hides an important premise - the overall upward trend of Bitcoin has not changed. Is that really the case? This may be the biggest question in your mind. So we should first clarify this issue. Because, only after figuring out where the "ship" is heading, do you need to decide whether to get on board.

3. Why hasn't the upward trend of Bitcoin changed?

The answer lies in those grand, lasting forces, the foundations that shape Bitcoin's long-term trend. Even in the fog of short-term market corrections, these foundations remain as solid as rock, shining with the direction of the trend.

3.1 Global adoption: 96% "uncharted territory", indicating vast growth potential

By 2025, only 4% of the world's population will own Bitcoin.

This data may seem disappointing at first glance, but from a different perspective, it harbors an incredibly growth potential!

Imagine a huge market with a population of billions, with only 4% currently developed, and 96% "uncharted territory" waiting for us to explore and cultivate. Isn't this an exciting "blue ocean" market?

A research report by River also confirms this: Bitcoin has realized less than 4% of its maximum adoption potential. This means that the path to Bitcoin's global adoption is still in its "infancy", the road ahead is long, and the growth potential is extremely broad.

Particularly noteworthy is that developing countries and regions will be the main force driving the growth of Bitcoin adoption. The report shows that North America is currently the region with the highest Bitcoin adoption, while Africa's adoption rate is only 1.6%. This precisely indicates that Bitcoin still has huge room for penetration in economically underdeveloped regions.

So what does this slightly more than 3% global adoption rate mean? The River report provides an analogy, as shown in the figure below.

This low adoption rate is equivalent to the internet in 1990, online banking in 1996, and social media in 2005. In other words, this is an era full of opportunities. Even if you haven't boarded the ship yet, it's not too late. Taobao wasn't the first e-commerce platform, Google wasn't the first search engine, and Netflix wasn't the first online video platform.

It's just the beginning. This 96% "uncharted territory" will be the most solid "demographic dividend" for the long-term upward trend of Bitcoin!

3.2 Three driving forces: Institutional entry + Clear regulation + National reserves

Bitcoin, once "sneered at" by traditional financial institutions, has now become the "darling" they are scrambling to pursue.

Standard Chartered Bank predicts that Bitcoin's price will reach $500,000 during Trump's term, and explicitly points out that "the growth of institutional adoption" is one of the key driving factors. Geoffrey Kendrick, head of digital asset research at Standard Chartered Bank, believes that the participation of institutions will not only reduce the volatility of the crypto market, but also enhance the security of the market. Additionally, this Standard Chartered Bank is the only institution that has accurately predicted Bitcoin's current bottom - $69,000 to $76,500.

Standard Chartered believes that another driving factor is the establishment of a clearer regulatory framework in the United States.

The Trump administration not only established a "strategic Bitcoin reserve", but is also actively promoting stablecoin legislation. U.S. Congressman Bryan Steil publicly stated that the United States has tremendous legislative opportunities in blockchain technology, Web3, and cryptocurrencies. Steil currently serves as the chairman of the U.S. House Subcommittee on Digital Assets, Financial Technology and Inclusion.

A CoinShares research report also points out that the establishment of a strategic Bitcoin reserve in the United States will have a more far-reaching long-term impact on Bitcoin adoption than the launch of an ETF. The current market severely underestimates the value of the U.S. strategic Bitcoin reserve, being more trapped in short-term liquidity. For a more detailed analysis, I recommend you read "Digital Fort Knox: The White House's 19,000 Bitcoin Stash".

In Europe, banks like DekaBank have started supporting cryptocurrency trading, and Boerse Stuttgart Digital is also actively promoting institutional-level applications of cryptocurrencies. All of this indicates that institutional capital is accelerating its influx into the Bitcoin market, and traditional financial giants are "rushing in".

As regulatory policies become increasingly clear, the share of institutions and countries holding Bitcoin will become larger and larger, becoming the dominant force driving the long-term rise in Bitcoin prices.

3.3 Macroeconomic improvement: PMI and M2 pointing to "positive reversal"

Although in the short term, the tariff policies of the Trump administration and the strengthening of the U.S. dollar index have brought certain "headwinds" to the Bitcoin market. However, from a more macroeconomic and policy perspective, the long-term upward trend of Bitcoin is still strongly supported.

The U.S. manufacturing PMI has been in expansion mode (above 50) for two consecutive months, which is seen as a signal of "positive reversal of the business cycle". Real Vision founder Raoul Pal points out that PMI leads the economy by about a month, and it not only leads the economy, but leads all assets. He believes that with the upward cycle of the business cycle, Bitcoin is expected to peak by the end of 2025 or even the beginning of 2026.

S&P Global Market Intelligence's research supports Pal's view, as shown in the figure below. You will find that when the PMI on the right side is greater than 50, GDP will generally show varying degrees of growth. The research believes that PMI data has predicted "every turning point of returns over the past 14 years".

Another indicator worth noting - the global M2 money supply - has also shown a "sharp upward" trend. Real Vision's research shows that Bitcoin's price usually reflects changes in global M2 within about 10 weeks.

Analyst Colin Talks Crypto has even precisely calculated the "46-day and 72-day lags" of the impact of changes in global M2 on Bitcoin prices through data analysis. Lyn Alden also pointed out that "Bitcoin has co-moved with global liquidity 83% of the time in any given 12-month period, making it a powerful barometer of liquidity conditions".

This means that the improvement in global macroeconomic liquidity will provide a strong "boost" for the rise in Bitcoin prices.

3.4 Summary: Three pillars of Bitcoin's long-term trend

The long-term upward trend of Bitcoin has not changed, and the core support comes from three irreversible macroeconomic forces:

96% blue ocean market: Currently, only 4% of the global population holds Bitcoin, and the adoption rate in developing countries is less than 2%, equivalent to the internet in the 1990s, with far greater growth potential than short-term market fluctuations.

Institutional and national strategic entry: Standard Chartered Bank predicts that Bitcoin may reach $500,000 during Trump's term, the U.S. is establishing a "strategic Bitcoin reserve" and accelerating stablecoin legislation, and European banks like DekaBank have already opened up cryptocurrency trading, forming a "triple thrust" of institutions + regulation + sovereign reserves.

Macroeconomic cycle resonance: The continuous expansion of the U.S. PMI signals a reversal of the business cycle, the global M2 growth rate has a 46-72 day lagging correlation with Bitcoin prices, and the liquidity easing and Bitcoin's "digital gold" attribute form long-term synergy.

So, the short-term 7.7 万 pullback is just a wave of the cycle, and the trend of the river is still surging forward. Then, is the price of 7.7 万 the bottom? Is this a good time to enter the market?

In fact, if you agree with my reasoning about the trend above, the answer is self-evident. Although you may not be able to buy at the lowest point, you will not buy at the high point either. The only thing you need to control is your own desire, and do not use too much leverage.

Conclusion: Be friends with time, dance with the trend

History does not repeat itself, but it always rhymes. When gold flowed from the Americas to Europe, it created the wealth myth of the Age of Discovery; when the Internet went from the laboratory to every household, it reshaped the way human civilization is connected - today, we are standing at the forefront of the digital asset revolution, witnessing the epic leap of Bitcoin from code to a global value carrier.

When 96% of the global population still do not hold Bitcoin, when sovereign funds begin to include crypto assets on their balance sheets, when blockchain technology becomes the new battlefield for major powers - this speeding "digital ark", has just set sail from the shipyard that built it.

The secret to dancing with the trend is not to predict the shape of the waves, but to understand the rhythm of the tides. Those investors who stood firm with Amazon during the Internet bubble burst, and the visionaries who heavily invested in Apple during the nascent mobile internet era, have mastered a truth: the trend is not a smooth straight line, but an ascending spiral composed of countless cyclical fluctuations. Just like the current 7.7 万 USD volatility, it is just a brief chord in the symphony of the crypto civilization, and the main melody is still rising towards the trust highlands built by hash power.

True dancers never need the spotlight to illuminate the entire path. When 96% of the audience are still watching from the sidelines, when sovereign funds begin to adjust their dance steps, the smart ones have already marked their notes on the blockchain score - they may misstep, they may stumble briefly, but as long as their feet are firmly on the tectonic plate of the technological revolution, they will witness the re-assembly of the financial continental shelf.

The trend is the sea, the cycle is the boat, the fool calculates the height of the waves, the wise calibrates the angle of the sails. The trend determines the overall direction of the market, while the cyclical fluctuations are short-term phenomena that rise and fall along the trend. When the dusk of the fiat system meets the dawn of the crypto economy, instead of chasing shadows in the K-line maze, it is better to plunge into the torrent of digital civilization and board the ark carried by the tides of the times.

Every pullback at this moment is a ticket that history has reserved for the awakened.