Analysis challenges Bitcoin diminishing returns theory amid recent gains

Quick Take

The diminishing returns theory, suggesting that Bitcoin will yield lesser returns with each cycle, is a subject of intense scrutiny. The examination of this theory from two points of view, the cycle low and the cycle all-time high, provides interesting insights.

In November 2022, Bitcoin’s cycle low occurred during the FTX collapse, dropping to roughly $15,500. Since then, Bitcoin has managed a staggering 287% appreciation, outpacing the returns of the 2015 to 2018 cycle (173%) and the 2018 to 2022 cycle (106%).

Considering the cycle from its all-time high, the bear market began shortly after the peak in April 2021, presenting a similar narrative.

We observe that Bitcoin has already hit its all-time high from April 2021 of roughly $63,000, a significant improvement compared to the previous cycles. At this juncture in the 2013 to 2017 cycle, Bitcoin needed roughly a 35% increase, and during the 2017 to 2021 cycle, a 20% increase was needed.

In conclusion, while this analysis doesn’t necessarily refute the diminishing returns theory, it highlights the strength of the current Bitcoin cycle.

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