Bitcoin price recovery will be 'significantly quicker' than previous cycles, analysts say

The recovery of the bitcoin price to all-time highs will be “significantly quicker” this cycle, according to the latest K33 Research report.

The drawdown has lasted for 755 days so far, currently around 36% off bitcoin’s all-time high of around $69,000 set in November 2021. That compares to the 1,178 days spent before recovery post-2013 and the 1,092 days post-2017, K33 Senior Analyst Vetle Lunde and Vice President Anders Helseth noted.

“Neither of the past cycles saw institutional demand comparable to the current, with major financial institutions both participating in the space and vocally vouching for BTC in public,” the analysts said. “In 36 days, U.S. ETFs will receive their final verdict, and the market shows considerable demand to accumulate exposure ahead of anticipated launches,” they added — arguing that the current run-up is caused by a real and compelling narrative.

Bitcoin bear market drawdowns. Image: K33 Research.

However, “Whether we revisit the $69,000 all-time high or not depends on the genuine flows the actual ETF will bring in the first few weeks of trading. Otherwise, this sets things up for the classic ‘sell-the-news’ moment next year,” analysts at QCP Capital warned today.

The Securities and Exchange Commission has yet to approve a spot bitcoin ETF in the U.S., having previously approved futures-based funds in 2021. The next deadlines for the SEC’s decision to approve, reject or delay applications from firms including BlackRock, Bitwise, VanEck, WisdomTree, Invesco, Fidelity and Valkyrie fall in mid-January. Bloomberg analyst James Seyffart recently said the window for potential spot bitcoin ETF approval was looking like it would fall between Jan. 5 and Jan. 10.

Data from institutional traders on the Chicago Mercantile Exchange also suggests they are not taking profit yet, with annualized premiums above 17% for bitcoin and ether and open interest at all-time highs, Lunde and Helseth noted. The premium is the difference between the spot price of an asset and the price of its futures.

CME premiums. Image: K33 Research.

Retail traders 'not wild yet'

Bitcoin’s 164% year-to-date price rise has not been mirrored by an increase in retail participation, Lunde and Helseth said. Website traffic data and exchange reports show retail demand is lower now than Q3 2022, they added.

Visitors to crypto websites, often used as a proxy for retail interest, have declined about 50% compared to a year ago, aligning with Coinbase’s Q3 report highlighting trading volume had continued to slide since 2021.

Quarterly web traffic. Image: K33 Research.

Google search volumes for Bitcoin, Ethereum and other crypto-related terms show a similar trend, according to The Block’s data dashboard.

Crypto-native derivative trading in the offshore market is not showing signs of “retail froth” either, the analysts said, with funding rates still at neutral. Though there are some signs of increased retail appetite building long exposure, they are “certainly not at alarming levels yet,” the K33 analysts added.

“The fact that retail participation remains shallow points towards BTC having a substantial ability to gear up further if crypto again finds its way into the limelight,” Lunde and Helseth argued.

Bitcoin's price rally continues

Bitcoin is currently trading at $43,747, according to The Block’s price data. The largest cryptocurrency by market cap is now up over 16% over the last week and 25% over the past month, having returned to levels not seen since the Terra ecosystem crash in May 2022. 

BTC/USD price chart. Image: The Block/TradingView.

In terms of altcoins, ether is up 10% over the last week to more than $2,260 — an 86% rise year-to-date. Solana rose 5% over the same period — now up over 500% this year. Meanwhile, BNB traded flat last week amid Binance’s legal and regulatory troubles, which have seen the cryptocurrency fall in 2023; it is down 6% year-to-date.