Rekt Capital recently discussed the concept of the “danger zone” for Bitcoin in a recent analysis, which typically occurs before the halving event. This period often sees historical retraces, as observed in previous cycles.
For example, in 2020 and the current cycle, Bitcoin experienced significant retraces before the halving. In 2016, there was a retracement of up to 29% to 40% leading up to the halving. The question now is whether the danger zone is over for Bitcoin in this cycle.
Looking at historical data, in 2020, Bitcoin entered the danger zone about 14 days before the halving, resulting in a 19% retracement. In the current cycle, Bitcoin entered the danger zone approximately 30 days before the halving, prompting an 18% pullback in March and a subsequent 17% pullback in April. These pullbacks may be considered part of the same consolidation phase.
Historically, the danger zone tends to last around 28 days, leading up to the halving event, consistently causing retracements in Bitcoin’s price. However, it’s essential to consider whether the danger zone might extend beyond the halving, as observed in previous cycles. In 2016, there was a post-halving retracement that lasted a few weeks.
Currently, Bitcoin is experiencing retracements close to 20%, which aligns with historical trends. If Bitcoin can hold support levels in the next two weeks, it could signal the end of the danger zone. However, there’s a possibility of further downside, potentially leading to a v-shaped bottom similar to previous cycles.
Rekt Capital also delved into the question of when the Bitcoin bull market will end and how long it will last. If history were to repeat itself, projecting a bull market peak around 518 or 546 days after the halving event, we could anticipate it to land around mid-September or mid-October. This timeline aligns with the traditional understanding of Bitcoin’s market cycles based on halving events.
However, another perspective to consider is the possibility of an accelerated cycle. This theory suggests that market cycles may be shortening due to increased adoption, institutional interest, and other factors. If this accelerated cycle hypothesis holds true, the bull market peak could arrive sooner than expected.