For many investors, especially those who’ve weathered multiple crypto winters, it’s evident that Bitcoin operates in roughly four-year cycles. Until 2022, there were claims that Bitcoin would consistently stay above previous highs.
This trend occurred in 2011, 2014, and 2018. However, in 2022, following the FTX collapse, Bitcoin’s price plummeted to $15,000, dipping below the critical $20,000 mark that was fleetingly touched in December 2017.
As speculation about Bitcoin’s peak value in the current cycle, expected to conclude around late October 2025, ensues, the research team at Diaman Partners has sought insights on estimating Bitcoin’s minimum value for 2026, particularly if another crypto winter emerges soon. Many experts believe we may have transitioned into a newer, more ‘mature’ growth phase for Bitcoin.
This perspective is backed by numerous factors. In the U.S., ETFs are attracting significant capital, with rising institutional interest, increasing treasury acquisitions, and pension funds beginning to invest in Bitcoin.
Yet, adopting a cautious engineering viewpoint, it’s reasonable to assume Bitcoin’s cycles will persist, albeit at a diminished intensity. From a risk management standpoint, the possibility of a crypto winter cannot be disregarded.
It’s pertinent to mention the concept of the reliable 200-week average model, developed by Adam Back, which is widely respected.
Bitcoin expected drawdown. Source: Diaman Partners
The accompanying chart indicates that, save for the notable decline in 2022 due to FTX, the 200-week moving average has historically served as robust support during price downturns. The red line illustrates the percentage deviation between Bitcoin’s price and this average, suggesting the 200-week average acts as a resistance level—a sort of upper boundary for potential drawdowns during a crypto winter.
A keen observer might note that the transition from peak to trough takes time. During this interval, the average continues to rise, which may inflate estimations of potential losses; this holds true as today’s figures show an average above $51,000, making a 60% loss seem exaggerated.
To forecast the position of the 200-week average by late 2026, marking the predicted end of a crypto winter (if it materializes) and assuming the cycle mirrors past amplitudes, Diaman Partners conducted a Monte Carlo simulation. This aimed to assess not only the probability of historical price series but also to outline a potential range for the 200-week average when conditions favor price support, using past Bitcoin cycles as guidance.
Bitcoin Monte Carlo Simulation. Source: Diaman Partners
For those interested in Monte Carlo simulations, a modeled approach incorporates diminishing returns and volatility—moving away from standard static mean and variance models—following power law dynamics in annualized returns over 200-week rolling periods for consistency, as depicted in the subsequent chart.
This caution stems from Bitcoin’s technical return structure and volatility, both of which have considerably shifted downward over the years, leading to the belief that Bitcoin is unlikely to experience exponential growth again, at least in terms of average historical returns.
200-week annualized returns and volatility. Source: Diaman Partners
This chart illustrates that Bitcoin returns lack an exponential nature; therefore, as its market cap expands, we can expect a reasonable decline in both average annual returns and volatility over time. The larger an asset becomes, the more effort is required to influence its value.
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However, to assume that further drawdowns of -50% or greater won’t occur given current volatility is unrealistic; thus, analyzing the potential drawdown during this fourth Bitcoin cycle is essential.
If Bitcoin were to see continued growth followed by a drop in 2026—or maintain alignment with the Monte Carlo simulations—the expected cycle low at the end of 2026 would exceed $80,000.
Bitcoin potential 2026 bottom. Source: Diaman Partners
For this scenario, from the 1,000 simulations, we selected the one illustrating robust growth for Bitcoin in the upcoming months, with a pronounced decline nearing the end of 2026.
Bitcoin price projected downside. Source: Diaman Partners
To backtrack from a possible 2026 low of $80,000, the table reveals the maximum potential loss during the next crypto winter, factoring in Bitcoin’s peak in the upcoming months. Considering past cycles have demonstrated decreasing drawdowns (-91%, -82%, -81%, -75%), a drop of -69% appears plausible, thus making a target price of $260,000 by 2025 seem achievable.
Bitcoin price tops and bottoms. Source: Diaman Partners
Conversely, when examining a logarithmic chart, the proposed trend aligns well with historical cycles. Of course, this analysis does not serve as investment advice but as an intellectual endeavor to forecast an inherently uncertain and unpredictable future, with maximum and minimum values grounded in models that may not necessarily hold true.
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.
