Topic: How Bitcoin Supercycle could become reality (Read 614 times)

Governmental approval of Bitcoin makes banning much less likely, making longer term holding safer
It is not unusual to have savings. Many people have pension savings, some own property, a few own gold. Saving means trading [less consumption today] for [more consumption in the future] (e.g. during retirement). So selling Bitcoin to buy stocks or gold just trades one risk for another risk, but you still have risk. Even going 100% cash has risk because of inflation. If you plan to hold for more than 10 years, temporary drawdowns are not important, only permanent losses hurt you. The SEC decision, the ETF approval, MSTR, etc. have brought bitcoin more into the political power structure. The more Bitcoin is owned by the powerful people who set the regulations, the less likely we will see a ban and therefore a permanent loss of one's investment in Bitcoin.


Limited potential for volatility reduction during bear markets, plenty of potential during bull markets, via more people selling into the bull market.

If you know a bear market is temporary you can buy the dip. However buying the dip is limited by liquidity (many become unemployed or higher bank lending standards). The S&P-500 has drawdowns of 50%. European stock Indizes have drawdowns of 75%. A minimum drawdown portfolio of 55% gold and 45% S&P still has drawdowns of roughly 30%. I don't see Bitcoin drawdowns to be fully eliminated.

The Bitcoin 90 day volatility of Bitcoin during bear markets is already only 2-3x higher than the S&P Index.


While during bull markets we see 6x higher volatility in Bitcoin vs. the S&P Index.


I think Bitcoin having a 2x higher volatility than the S&P Index is still justified. Maybe one day Bitcoin's volatility drops below the S&P towards gold, but probably not within the next 10 years. This seems to suggest that catching the falling knife is working.

However I see plenty of potential for lower volatility during the bull market. We could calm this volatility by holders selling more aggressively into the bull market. As a result we will get less extreme tops and also lower drawdowns from the top.




The Bitcoin bottoms look stable, low Bitcoin valuation has very low volatility, therefore I think the DCA already works very well. I'm always happy to see more DCA, but most volatility is based in the bull markets not the bear markets.

---

The competent acitve-investor fraction will shift from real estate to Bitcoin as generations cycle
People who are not interested in managing their own finances will simply stick to what the financial advisor tells them to do and are likely to invest in long-term US bonds regardless of inflation and the US fiscal situation. Only a subset of people (i) have money to invest, (ii) are competent enough to stick to a plan, and (iii) are interested enough to manage their own finances. Let's call them active investors. Many active investors are long property and short paper, a historically excellent trade. Many are also long equities. Most wealth is controlled by old people who are very competent at executing what they know, but bad at learning new things. They will just keep doing real estate. However, as the generations shift, bitcoin (IT & private key management) comes easier than real estate (maintenance and tenant management). People who would otherwise have handled bank loans, tenants and maintenance will also be competent enough to hold Bitcoin long term or buy it cheap and sell it expensive. As bitcoin becomes more integrated into the financial market infrastructure, there will be also more arbitrage.

I do agree that it looks like we are going to have a good year, but also when something unexpected happens that could make people fear it. We expected ATH to be broken after the halving, it was blown over before the halving and this made people happy because they thought "if it got high this early, then it will be even higher later on" and they might be right about that there is no doubt about that but they could also be wrong and people who do not buy it currently are fearing that.

I believe that it will go up even more, I am on that side, but I totally understand the people who do not expect it to be any higher as well, those have their own opinions and predictions and who am I to judge anyone about anything in the end.

I think there is no need to predict it because it is already happening. We already hit a new ATH too early this year and for sure there will be more to come after the halving and on the 3rd and 4th quarter of this year. Money is one of the important things in this world but some don't wish anymore to have more of it. They are either rich or poor, and if someone badly needs a money they might actually sell their investment and that can affect their prices negatively.

We should not worry though, because like you said, the situation is still better nowadays and it may take some time again before the situation shifts from its other side but before that happens, I'm sure all of us are now prepared.

I also think that the market can go very high but you are right that people who bought Bitcoin during the bear market when it was around $20k, have already made more than 3x profit if they had held their assets throughout this time, and waiting for 3 to 4 more years can be a bad decision for them because it is just a prediction that the market will go up and no one is sure about that, and in case the price of Bitcoin drops from here, they will have to let go of the profits their investments have earned so far.

The sort of economic situation the world is facing, people shouldn't hold their assets for the farthest future. One more solution for that is that they should take some profit when they see the market is declining, some profit along with the invested capital should be taken out and the rest should be kept.

Very good points.

"Legitimacy" is indeed important. We can argue that even if the ETFs approved this year "only" are providing access to Bitcoin for a selected class of investors, the psychologic effect ("Bitcoin is now part of the established financial system"), even increased by the fact that it was accepted by an entity (the SEC) often regarded as to be hostile to cryptocurrencies, is probably crucial here.

For the case of societies in lesser developed countries, I could bring up the case of Argentina, where BTC often even in bear markets performed better (sharp crash episodes like near the Terra/Luna desaster aside) than the local currency which constantly lost 10-25% per year (and 20-65% per year in 2021-24). These use cases however still are limited: your currency must be extremely weak for that to happen. And even in Argentina the USDT and other stablecoins are way more popular as an investment than Bitcoin, even if they can be censored easily (due to Ethereum providing blacklist mechanisms).

Thus, I'm still interested in the development of decentralized (i.e. equally or nearly equally censorship-resistant as BTC) financial products providing additional possibilities to hedge against Bitcoin volatility, mainly against the harsh bear markets. I've often mentioned the potential of decentralized option contracts based on atomic swaps but I still see no significant progress in this field, while DeFi on altcoin chains already provides such possibilities, but with a much weaker censorship protection. So there are definitely still some obstacles to be sorted out. Smart property-like systems could help here too, but they also are difficult to realize if they should be both censorship-resistant and low-risk.

Exactly that is the idea. Once it happens, it will likely become a virtuous cycle.

Such a development could however bring also a particular new risk: the probability for the extreme growth that characterized past bull runs would decrease in this scenario, and certain traders (mainly) will leave Bitcoin and dedicate e.g. to small-cap and micro-cap stocks again because they need more volatility. The challenge is thus that ideally this "speculator exodus" should happen only when legitimacy and confidence for BTC are already so high that the Bitcoin market doesn't get hit and can sustain itself without this class of traders and speculators (including the "lets get rich quick" people).

Thus I think while we are on the path, on the way forward there could still go something wrong, which could lead into the other extreme: the bear supercycle (>4 years without new ATHs and significantly lower prices). I'm optimistic but still think there's a significant probability for such a scenario.

Nicely written up and I think there is an overarching aspect to be found in Bitcoin's potential future proliferation that encompasses your 3) and 4) as well as countless of other aspects. I am referring to the institutionalization of Bitcoin within local, regional and eventually the global society. The needs of specific sub-societies that Bitcoin can serve are fundamentally different across the globe.

When we are talking about developed countries, institutionalization is mostly about establishing legitimacy. Those who like to speculate on things are probably into Bitcoin by now anyway. Especially the younger generations are including digital currencies into their daily talk more and more. I can observe that within my own surroundings. But now that ETFs are out, I think we will see a certain evolution in the savings and investment landscape offered by financial institutions in general. Naturally, this takes time and has nothing to do with a lack of understanding of the technology or a misled ideology by the dominating financial sector. Either way, the growing demand for this specific technology and its characteristics that Bitcoin brings about will push banks into coming up with their own offerings as a standard form of investment. In several years from now the banker will say something along the lines to customers who have spare cash and want to invest it: "are you interested in renewable energies, or digital currencies...". I just put this in a nutshell and there will of course be a more detailed introductory sentence to new forms of investments than this, but Bitcoin will get there like precious metals did. It is still a no-go in retail banking to plainly offer Bitcoin as an investment form. But Bitcoin will eventually be further legitimized through various avenues in the future. Anchoring Bitcoin within the middle of society as something normal, something that is accepted and made accessible through various institutions and authoritative actors will lead people from all parts of the spectrum to decide to at least hold some of this thing that once used to be mysterious and falsely depicted as some illegal method to buy drugs. I think it is already happening and those who are at least to a certain level familiar with what is going on (ETFs etc.), know that if Bitcoin really was the ultimate means to get drugs and weapons, it would have never gotten that status of a valid ETF underlying acknowledged by the most powerful financial authorities in the world.

Saving plans including Bitcoin will become more of a standard over time. Those who are skeptical will realize at some point that Bitcoins are not 16th century tulips. But it does take time and different people have different levels of skepticism. It is not only about education. People who are very strict and narrow-minded investors anyway, will probably never touch Bitcoin unless certain life-circumstances produce incentives that they otherwise haven't felt thus far.

In less developed countries Bitcoin doesn't need institutional legitimacy, but problem-specific functionalities. This can be the hedge against inflation, the need to have a safe place to save money when banks can be robbed, shut down within an instant or plundered due to corruption (some African countries for example). Some small African sub-societies are using Bitcoin to save money, to get away from all the issues that come with putting cash under the pillow. Then there is of course capital mobility: if someone wants to leave the country but there are legitimate or illegitimate restrictions imposed on individuals or organizations that intend to transfer the cash out of the country. Or when it comes to supporting certain causes where it is impossible or risky to send money from a bank account.

But all these things will develop over time more and more and the banking system will try to emulate what Bitcoin can do, but truth be told, this is a losing race for the banks because they will run with their heads into a wall. I assume that the United States has long taken a stance pro Bitcoin, but they don't openly communicate about it. My guess is that they will make sure to have their hands on a certain share in the entire Bitcoin network and then gradually drive forward its legitimacy. By reducing overall uncertainty as to where legislation and politics will allow Bitcoin to go, more people will decide to include Bitcoin as a saving plan, i.e. more DCA, and they will more courageously catch the falling knife, thereby reducing the drop height of the falling knife further and further from cycle to cycle. That is how your super cycle will play out over time. The downside "correction" will turn into potential, which will more quickly be exploited, which will reduce the drop height of the falling knife in the next cycle, which will foster confidence, etc. etc.

But after all, it is about time. When I talked to older people about Bitcoin 10 years ago, they thought I could potentially be a criminal. This has changed for most of them, but there are of course still some of them who mostly focus on the headlines "drug dealer caught and X Bitcoin confiscated".

I've already listed some points in the OP.

But to elaborate a bit further on my "line of thought":

Bitcoin's most important unique selling proposition is censorship resistance. Censorship resistance makes sense mainly for payments (value transfers) and "storage of value". Thus all adoption based on these two main functions should imo be encouraged.

But these functions are the ones most affected by Bitcoin's volatility. You currently don't really have a reliable storage of value with BTC, only if you hold it for more than 2-4 years (depending where you invested). And the payments function is stagnating partly also due to volatility ("why waste my precious btc on buying things") and also because of the fee problem, which is why scalability-enhancing technology is so important. Currently, there are more ecommerce transactions in LTC than in BTC!

The points I outlined in the OP are several kinds of investment and/or usage scenarios which would be useful to really enter the path to a storage of value and payment medium. It doesn't have to be a perfect unit of account, but it should also not put your capital in serious danger if you invest in a bad moment (and can face a 70-90% price decrease). Numbers aren't that important ("1 billion people using BTC"), the important thing is that the share of these usage scenarios grows and eventually becomes dominant. I think we are on the path already, but need to advance further, and the faster the better.

In contrast, speculation on CEXes is exactly the opposite. You don't need censorship resistance for that, because the CEX can always censor you. It can be argued that many of the strategies employed by speculators are even harmful to the storage of value concept because they tend to rise volatility (short selling, massive squeezes and liquidations, extreme FOMO etc.). So this is an use case where while I would not say we should discourage directly (only regarding security) no further encouragement is necessary.

Just a quick think on this, I don't think we have reached a sort of maturity because well, everything about it has suddenly become regulated, it has gained connections with stock markets, investment principles and vehicles but more of a forced transition to the inevitable because of the lack of actions that we're prevalent in the past, acts that greed and the let's call it a solid mirage of a reward is erasing quite efficiently.
Much like you can't become a gentleman overnight but if you stopped picking your nose you still have the benefit of doubt on what you are!


If there's one thing I always praise Bitcoin is for being a tool you can use how you please and not breaking any of the core principles, if you want to invest go for it, you want to hide value in a picture or a soda can, do it, if want to buy something from darknet, your choice bro, want to hide money from your spouse and his lawyer, well, sorry for your situation but here's the tool to do it. But this is why I never got a real grasp of what "adoption" means!
Does it mean 1 billion people using Bitcoin daily?
Does it mean 1 billion addresses with a balance?
Does it mean 1 trillion CEX accounts?

With what do we compare it, gold lingots? Visa cards? Stock market shares distribution? Robinhood accounts?
This is the reason why every time I hear adoption I want to ask what kind of adoption and more importantly, for what adoption do we (whatever we means here) even aim?

I disagree. Imagine where the fees would be now if Segwit hadn't happened. BTC throughput has more than doubled since pre-Segwit times. Taproot is still new, but stuff like RGB and Taproot Assets, once more mature, could be game changers too, leading to a new paradigm for crypto tokens where off- and onchain methods are combined for a more scalable approach.

And while sidechains/rollups are still not really a thing on Bitcoin, they have improved Ethereum throughput already greatly. Already in 2023 gas fees plummeted 80%. I'm observing some projects which could lead to similar developments on Bitcoin, mainly Nomic (already operational but still in an experimental stage) and SBTC on the Stacks blockchain (mainnet not launched still). These projects have still their problems, and I would even predict that a completely different sidechain will be the one that finally reaches the breakthrough. But compared to 3-4 years ago when the development of L2s had been almost stalled, they have made a big jump forward.

Regarding LN, you may have missed that it is now accepted at most major exchanges which is a big milestone. LN was launched in 2018 on mainnet, it is now at the same stage than social networks were in 2003 (if we take into account that the first social networking service, SixDegrees, was launched in 1997). The early 2000s in social media tech were a period which "to the average user" looked like a stagnation but under the hood there was MySpace and one year later Facebook emerging which were the foundation for the boom of this tech in 2007-10. So if LN evolved in the same speed than social networks, we could expect a final breakthrough in mass adoption in ~2026-28. Maybe it's even faster

I sorta agree here, although I think it's still a quite optimist point of view. It's possible that we've not reached this point entirely. But we may be on a good path, partly due to ETFs, ETNs and other financial products based on BTC.

I agree here and that's the whole point of the thread "Adoption" in these times is basically "more people speculating". And if we're unlucky, it's people speculating in exactly the same way than in the 2013 and 2017 bull runs: trying to buy when the bull market is already in full force and then refuse to sell when the greed level is highest -- and then panic selling in the bear market.

I see more people talking about DCA and similar stuff (I take the opportunity to this excellent thread by @virginorange for an improved DCA strategy) but I believe it's still a minority phenomenon. If we want the Supercycle, this has to change. Maybe gradually.

BTW, why is not anyone talking about the obvious utility as alternative investment now that we have ETFs?

For me the 2017  to 2019 period was critical to my personal stance towards bitcoin holdings. I did mine, take any token on offer by bounty hunting or translating and played trading with ethereum an a few other things. I did get profit from it.

Now, I clearly figured out that I would have made more profit from bounty hunting only for bitcoin and simply buying and holding (hodling if you want). It is as simple as that and it seems that lots of people are in that wavelength now.

Nostradamus predicted a future that would not be affected by his own actions, Satoshi designed a thing that will work as that in the future, there is serious difference between those two.


For once, I don't think people would dump bitcoin now to 90%!
The perspective has changed and it's no longer perceived as something that can just go out the back door in a matter of seconds, it has earned a solid foothold in the markets, and there are people with long term investments that are chasing not just huge revenues but even continuous over the stock market average small gains long-term.
But still not quite a supercycle, more like a chimera of things, cause I don't see with this change huge jumps happening also, when gains will in short periods outpace other investments some will just take those gains and switch to something else, believing and creating themselves tiny cycles of growth and retracements but with an overall direction following stock markets and economic trends.

I was quite the pessimist back last year, I was on the verge of betting that the halving will not do us any good either but after the ETF success (yeah , complete success, not even going to argue here) I don't see anything really bad happening that would bring us back to a linear growth with an under 30k as per November baseline.


Cryptos did a lot of piggyback riding on technological advancement.
If people in 1996 out have the same internet as we have now Facebook would have grown in a matter of months to the behemoth it is today, look at tiktok..
Paypal grew slowly because not everyone was buying stuff online, common, how many people here had internet on their phones in 2002?  

I'm on the same page as hatshepsut93 on the stagnation, let's be honest other than the price, it for sure hasn't made any progress in things like commerce or even remittance, adoption has turned more to some numbers in a CEX account, and ..that's about all.

Agree with that, the market is surely getting slow it just needed more money in the system in order to break that cycle, but in my opinion, Bitcoin surely adapted a lot in the past years, so Im really expect for the market price to max up to 100k+ in the market hopefully in the Bullrun if it is going to happen. Compared to the past years I would easily say that Cryptocurrency really adapted to a lot of people right now, there are tons of people that is doing trading already, seems easy for them because it is really accessible right now compared to the past years, a lot of influencers are doing trading as well, well probably because there are already a lot of tutorials out there and if you really want to learn to invest and trade on the cryptocurrency you could easily do it right now if you have the resources, with just a computer and internet. I mean the progress was just too fast with this kind of technology.

Probably the cycle is still going to happen related to the Bitcoin halving timeline where the market is going to skyrocket but if we want to break that cycle by reaching another goal, or breaking the past timeline, creating new records something like that like a supercycle, it just needed a huge amount of money, and that is not going to be easy for sure since a huge amount of money is gonna need in the Bitcoin. Still possible with the structure of limited supply of 21 Million, calculate that with the population of the world it is just doable, the possible market price is just too high if a lot of people are going to invest.

SegWit and Taproot didn't change much for an average user, and LN is still so far from being "officially" launched that it might as well be ignored. Bitcoin's scalability hasn't changed much from its release, and features for an average person too.


Facebook and Instagram weren't possible in 1996, because Internet speeds couldn't handle even a few pictures, needless to say things like video streaming. And forums back then were rather small things with thousands of users while Facebook has billions. And developing such platforms wasn't possible 30 years ago because web browsers couldn't do a lot of things they do today. So in my view the progress of web technologies is far bigger than the progress of Bitcoin.

I agree about the centralization, and lots of the tokens on ETH are indeed useless, and there is also a kind of "DeFi circlejerk" where you use DEXes to trade DEX tokens

However, there are some projects too which do have some utility, and businesses of any kind can crowdfund on Ethereum (if there aren't operating in some regulated market). They can of course also use Bitcoin, too (with "protocol layers" like Omni or Counterparty) but Ethereum is far more established at this time for this use case. So it's possible that in the case of a really deep crypto winter the crowdfunding scene keeps Ethereum a bit more alive. However, if Bitcoin recovers (due to finding real usage and adoption outside of speculation) my guess is that it will overtake Ethereum again.

This may appear so at the first glance. But first, Bitcoin is evolving, there are improvements like Segwit and Taproot, and the most important milestones are second layers like LN and sidechains (even if there is still no decentralized BTC sidechain, rollups on Ethereum are making progress in this field).

Second, I believe the perceived progress in internet technology is also not that significant as it seems, the "progress" here has much more to do with adoption (e.g. in the realm of social media). Facebook or Instagram are technically not that different from a web forum of ca. 1996, it's basically a HTML frontend with a database containing messages and a bit of JavaScript. Of course hardware improvements have made new developments possible or better, like AI and more realistic visual stuff (videogames, ultra HD imagery). In fact, tools like ChatGPT, DALL-E etc. are the only field where I really could see "revolutionary" changes in the last 20-25 years. But in general: the web/tech business models which weren't working in the 90s mainly work now because the Internet is used by the majority of the population, not so much because of technological advancements.

If we see some more progress particularly in the layer-2 field, this could of course improve the chances for a Supercycle because it can make mass adoption easier.

This has been my fear for a long time - if most of Bitcoin's value come from "buying it to sell later", then sooner or later it will crash very hard until its value mostly will reflect its utility.


Ethereum is far worse than BTC due to its high centralization, and its utility is actually fake, because it just provides crowdfunding and marketplace for more useless tokens.


The difference between crypto and dotcom is that the Internet technology was making constant and fast progress every year, while crypto has been stagnant for a long time. Bitcoin is not too different from Bitcoin of 10 years ago, and altcoins just invent new ways to sell premined tokens with no real use - DeFi, NFT, ICO and so on is essentially the same.

Yep, there is for example the "long Elliott wave" theory, for example shown here. Essentially while this model is still bullish, it implicates that the price would fall, after reaching >100.000$, to much lower lows than we're accustomed to and stay low for more than 4 years without new ATH, even if the long term trend could be still bullish. And there is also the Hyperwave theory with similar assumptions.

On the other extreme we see the S-curve of adoption theory, which is the base for highly speculative models like Stock 2 Flow, but also for more serious concepts, like Bitcoin being adopted massively for payments and savings alike.

As I wrote in the OP, I think everything depends on the kind of adoption we'll see in the coming years. If Bitcoin isn't able to convince the world that it has real value, and only remains an asset people buy to "make money" and get rich fast, then a super bear market is completely possible. If there is no indication of Bitcoin's real value-of-use, then the speculative value remains, which isn't much higher than that of the average altcoin. I guess that in this case Ethereum could surpass Bitcoin as leading cryptocurrency for a while, because its smart contract model is rooted deeper in "real economy" due to the usage to crowdfund tech companies.

Such a super bear market could however also be an opportunity: if the speculative capital is driven out, but Bitcoin's USPs remain uncontested (uncensorable, borderless digital money), then the supercycle could even materialize after a super bear market with prices of let's say <$5000. Basically that would be similar to the dot-com/tech bubble, which lasted a little bit less than 10 years until it popped (early 90s to 2000/2001), followed by a depression but then sustainable growth after 2009/2010 when the business models that were still an illusion in the 90s and early 2000s finally began to work.

Yeah well, I wouldn't put too much hope in that either. Dan Held was already saying 4 years ago that there could be a supercycle in this very cycle that is ending, and whose peak price could have reached $0.5M. It could and would, but it didn't happen. I do not rule out that people's Bitcoin buying and holding habits can influence the cycles but I better avoid thinking that this will translate into spectacular price growths, because with the market cap that Bitcoin has, it is increasingly difficult to move it.

The Bitcoin supercycle is already a reality because it has more than fulfilled some of these points so stated in the post and with the spot exchange traded funded being approved, the larger pockets, that is big companies and corporate bodies as well as individuals with more money can buy BTC investments without any FOMO.

The price surpassed and almost nearing $80k beating the previous all time high just as we anticipate the halving to soon happen in this April. It's just some days to the fourth halving and so many persons and enthusiastic investors can't wait for it to happen so the bull run comes and they sell whatever HODLing they accumulated for as long as 5 or more or even lesser number of years.

Four year cycle thing is a reality that has happened each time so far, why would that change? Why would that be not true? I mean people who doubted it became aware that they made a mistake, and we are now making a good amount of money from it as well. I get that it is not that simple to focus on this, but as long as it exists and it has been proven each time, we could just focus on that being the most important thing.

I believe that the best thing to do at this moment would be just letting it be, and that's how we would move forward with it. I know that it is a danger to many people, and could probably have some trouble along the way, but that's just the way it is and will always be related to that without a doubt.

Perhaps this explains why the surge even before the halving period occurs. Coupled with the etf approval I have a feeling this circle will be different from previous. I can say the first 2 option already happening,  I mean more people buying and holding btc.
More people businesses already accepting btc for transactions.
It already looks like btc is pumping and before the halving and will also pump after the halving which can already be considered as super. I am not sure if this pattern has happened before in previous circles.