Historically, every bitcoin price bull market has exhibited a recognizable pattern characterized by explosive upside movements followed by significant drawdowns, with each successive cycle yielding lower percentage gains than its predecessor. This phenomenon, referred to as diminishing returns, has emerged as one of the most enduring narratives in Bitcoin. The pressing inquiry at this juncture is whether this cycle will adhere to the established trajectory or if the evolution of Bitcoin as a legitimate asset class might alter the course.
In this cycle, we’ve observed around 630% growth in BTC from its cycle low to the latest all-time high. That stands in stark contrast to over 2,000% during the last bull market. For Bitcoin to align with the scale of the previous cycle, it would have to hit approximately $327,000, a target that appears more improbable by the day. The less explosive upside gains can be attributed to the Supply Adjusted Coin Days Destroyed metric, which monitors the velocity of older coins moving on-chain. Historically, during previous cycles like the 2021 bull market, long-term holders often chose to sell once Bitcoin had surged approximately 4x from its local lows. In this cycle, we have observed that profit-taking has taken place after only 2x moves. Recently, there have been spikes in CDD prompted by relatively modest price increases of 30–50%. This indicates a developing investor demographic: long-term holders are increasingly inclined to take profits sooner, which mitigates explosive growth and stabilizes the market framework.
Another factor is Bitcoin volatility. Bitcoin’s quarterly volatility has shown a consistent downward trend. This not only lowers the chances of extreme blow-off tops but also fosters a more robust long-term investment profile. Reduced volatility indicates that the capital inflows necessary to influence price become more substantial, yet it simultaneously enhances Bitcoin’s appeal to institutions looking for risk-adjusted exposure. The Bitcoin Sharpe Ratio highlights that Bitcoin currently boasts a score more than double that of the Dow Jones Industrial Average. In other words, Bitcoin continues to provide exceptional returns when weighed against its risk, even as the market finds its footing.
The Golden Ratio Multiplier offers a framework for forecasting diminishing returns. Every cycle peak has corresponded with increasingly lower Fibonacci multiples of the 350-day moving average. In 2013, the price hit the 21x band. In 2017, it hit the 5x band, while in 2021, it reached the 3x band. This cycle, Bitcoin has notably reached the 2x and 1.6x bands, yet a rebound toward the 2x levels is still a possibility. Forecasting these 1.6x and 2x levels into the future, according to their existing path, indicates a target range of $175,000 to $220,000 by year-end. Naturally, the data is unlikely to unfold in this precise manner, as we would observe the 350DMA trending more sharply upward as we approach these upper targets. The point is these levels are in a state of flux, consistently indicating upward targets as the bull cycle advances.
Diminishing returns do not diminish Bitcoin’s appeal; rather, they amplify it for institutional investors. Bitcoin’s less violent drawdowns, potentially lengthening cycles, and stronger risk-adjusted performance all contribute to its status as a more investable asset. Nonetheless, as Bitcoin continues to evolve, its potential for growth is still remarkable when juxtaposed with conventional markets. The days of 2,000%+ cycles may be behind us, but the era of Bitcoin as a mainstream, institutionally held asset is only just beginning, and will likely still provide unmatched returns in the coming years.