Most investors, particularly those who have weathered one or more crypto winters, now recognize that Bitcoin operates in cycles of approximately four years. Until 2022, many believed Bitcoin would consistently stay above its previous peaks.
This phenomenon occurred in 2011, 2014, and 2018. However, in 2022, the price of Bitcoin plummeted to $15,000 due to the FTX collapse, falling below the critical $20,000 threshold, which was briefly surpassed for a few days in December 2017.
While there’s much speculation about Bitcoin’s potential peak value in the current cycle, expected to conclude by late October 2025, the research team at Diaman Partners has sought to determine the minimum Bitcoin value for 2026, should a crypto winter occur in the near future. Some experts suggest that Bitcoin’s cyclical phase may have ended, paving the way for a more ‘mature’ phase characterized by steady growth.
Several factors lend credence to this theory. In the U.S., ETFs are accumulating substantial funds, while institutional demand is rising, particularly among treasury companies and pension funds that are now permitted to invest in Bitcoin.
However, maintaining a skeptical engineering approach leads to the belief that Bitcoin cycles will persist, albeit with reduced intensity in the coming years. At a minimum, the possibility of a crypto winter should no longer be underestimated from a risk management perspective.
Importantly, the robust 200-week average model, a concept championed by Adam Back, is highly regarded in this context.
The chart illustrates that, aside from 2022—where prices fell unexpectedly due to the FTX situation—the 200-week moving average has historically provided strong support during price declines. The red line on the same chart indicates the percentage difference between Bitcoin’s price and this average, suggesting that the 200-week average represents a resistance point, acting as a potential maximum drawdown threshold during a crypto winter.
Observers might argue that transitioning from a high to a low requires time. During this period, the average continues to ascend, potentially overestimating the possible loss; this is particularly true given that the current average exceeds $51,000, making a 60% loss seem exaggerated.
To predict where the 200-week average will stand by late 2026—should a crypto winter transpire—and if it follows the patterns of previous cycles, Diaman Partners conducted a Monte Carlo simulation. This analysis aims to estimate not only the likelihood of a historical series reaching a specific price but also to forecast a value range for the 200-week average at which the price might find support, based on prior Bitcoin cycles.
For enthusiasts of Monte Carlo simulations, a model featuring decreasing returns and volatility—aligned with power law functions on annualized returns across 200-week rolling windows—was utilized for consistency, as depicted in the chart below.
This caution stems from the evolving technical structure of Bitcoin’s returns and volatility, which have diminished significantly over the years. This decline leads to the conclusion that Bitcoin is unlikely to experience exponential growth based on average past returns.
This graph indicates that Bitcoin’s returns are not exponential; as Bitcoin’s capitalization increases, one can expect diminishing average annual returns and volatility. A larger market cap necessitates more effort to influence price movement.
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However, assuming there will be no further drawdowns of 50% or more given the current volatility is overly optimistic. Therefore, evaluating the potential drawdown for this fourth cycle in Bitcoin’s lifecycle is crucial.
The simulation, which generated 1,000 random historical series, indicates that Bitcoin has only a 5% chance of being valued below $41,000 in December 2026. This implies that the price would have surpassed the moving average of approximately $60,000 despite possible declines. According to the 5th percentile (indicated by the red line in the chart), the target price at the end of the crypto winter cycle, as per the 200-week moving average, would be around $60,000.
If Bitcoin’s price continues to rise and only declines in 2026—or remains in alignment with the Monte Carlo simulations—the projected support value for the cycle low by the end of 2026 would exceed $80,000.
To illustrate this scenario, we selected from the 1,000 simulations the one that indicated robust growth for Bitcoin in the coming months, followed by a substantial decline approaching the end of 2026.
Using reverse engineering from the potential bottom of 2026 at $80,000, the accompanying table displays the maximum loss projected for the next crypto winter based on Bitcoin’s peak attainment in the forthcoming months. Given past cycles have exhibited diminishing drawdowns (-91%, -82%, -81%, -75%), an expectation of a -69% drawdown seems reasonable, making a target price of $260,000 achievable by 2025 not entirely unrealistic.
Conversely, examining the logarithmic chart reveals that such a trend is consistent with previous cycles. This analysis should not be construed as investment advice; it merely represents an intellectual exercise aimed at forecasting an inherently uncertain and unpredictable future. The cited maximum and minimum values are based on models that may not necessarily materialize.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
