Bitcoin investors seeking to understand potential future support levels now have sophisticated analysis from Diaman Partners, which projects the next Bitcoin cycle bottom could land between $60,000 and $80,000 by 2026 using advanced Monte Carlo simulations and the trusted 200-week moving average model.
Understanding Bitcoin’s Historical Cycle Patterns
Bitcoin consistently demonstrates four-year cycles that experienced investors recognize. Previous cycles in 2011, 2014, and 2018 maintained support above prior highs. However, 2022 broke this pattern when FTX’s collapse drove prices below $20,000. Despite current optimism about Bitcoin’s maturation, Diaman Partners maintains that cycles will likely continue, albeit with reduced intensity.
The 200-Week Moving Average as Critical Support
The 200-week moving average provides exceptional support during price declines, except during the 2022 FTX crisis. This model, championed by Adam Back, represents maximum expected drawdown during crypto winters. Currently sitting above $51,000, this average continues growing, potentially reducing future loss percentages compared to historical patterns.
Monte Carlo Simulation Methodology
Diaman Partners conducted 1,000 random historical series simulations using decreasing returns and volatility models. They applied power law functions on annualized returns over 200-week rolling windows. This approach acknowledges Bitcoin’s changing technical structure, where both returns and volatility have decreased significantly as capitalization grew.
Projected Bitcoin Cycle Bottom Ranges
The analysis reveals compelling projections for Bitcoin’s potential cycle bottom:
- 5% probability scenario: Bitcoin falls below $41,000 by December 2026
- Most likely scenario: Support around $60,000 based on 200-week moving average
- Bullish scenario: Support above $80,000 if strong growth precedes decline
Implications for Maximum Drawdown Expectations
Historical drawdowns show consistent improvement: -91%, -82%, -81%, and -75% across previous cycles. A -69% drawdown appears plausible if Bitcoin reaches $260,000 by 2025. This projection aligns with logarithmic chart trends observed in previous cycles, suggesting continued pattern adherence despite market maturation.
Risk Management Considerations
While institutional adoption through ETFs and growing treasury allocations support Bitcoin’s maturation thesis, prudent risk management requires acknowledging potential cycle continuation. Investors should consider both scenarios when developing strategies for the coming years.
FAQs About Bitcoin Cycle Bottom Predictions
What is the 200-week moving average?
The 200-week moving average represents Bitcoin’s average price over the past 200 weeks, serving as a key support level during market downturns.
How reliable are Monte Carlo simulations for cryptocurrency?
Monte Carlo simulations provide probabilistic outcomes based on historical data, offering valuable insights though future market conditions may vary.
Why might Bitcoin’s cycles continue despite institutional adoption?
Market psychology, halving events, and macroeconomic factors may perpetuate cycles even with increased institutional participation.
What time frame does the 2026 projection cover?
The analysis focuses on late 2025 through 2026, corresponding to potential cycle completion and subsequent bottom formation.
How should investors use these projections?
These models serve as risk management tools rather than absolute predictions, helping investors prepare for various scenarios.
What factors could invalidate these projections?
Black swan events, regulatory changes, or unprecedented adoption rates could significantly alter projected outcomes.
