Many Bitcoiners seem to take it for a "given" that Bitcoin's price moves in 4-year cycles ending with an ATH:
- First cycle: 2009-13 - with ATH ~$1100
- Second cycle: 2013-17 - with ATH ~$19600
- Third cycle: 2017-21 - with ATH ~$69000
- Fourth cycle: 2021-25 - ATH: $???
There seems to be also a widespread acceptance that in the cycle there has to be a bear market with drastic price reduction (75%-93%).
But what if this all is only a coincidence? Let's analyze the arguments for this assumption. I already will say that I'm myself not sure which is the correct answer. So maybe we come closer in the discussion.
1) First argument in favour of the "coincidence hypothesis":
There were actually only two complete 4 year cycles.The argument is based mainly on the fact that 2009-2013 cannot be viewed as a single cycle, it was at least 2, perhaps 3 cycles. At least the high in 2011 ($32) followed by an extreme bear market with a very pronounced low ($2) should be viewed as a separate cycle.
I think there are even reasons to assume that in 2013 we had a separate cycle too: The April high ($260) could have been seen as an important top too, if we take into account that the price then lowered over 80% in a few months to a low of $50.
We could counter this argument saying that the market was immature back then and thus wild swings were normal. But I think we still can't say that 2009-13 was really a "cycle" like 2013-17 and 2017-21 were. There was, for example, no real crypto winter, perhaps late 2011/early 2012 but it was much shorter than in other occasions.
And the 2021-XXXX cycle has probably not ended still. We don't know if the high will be in 2024, 25 or even later ... it could even be a
Supercycle.
2) Second argument:
Above all the bear markets were driven, in several occasions, by external factors and news.This is actually the strongest argument for the "coincidence" hypothesis, I think.
Let's analyze first the most obvious case: the coronavirus pandemic in 2020-22. I think it was obvious that this event caused the crash in March 2020, which looked like a clear anomaly in the chart. But let's look further. In 2019, the price had actually come very close to the 2017 high. If the Covid crash didn't happen, it is quite likely that in early to mid 2020 already a new ATH could have been recorded - perhaps before the halving event. Maybe the top of this cycle could also already happened much earlier, perhaps even still in 2020, or in early 2021.
So the second cycle could have already been in reality a 3 or 3.5 year cycle if Covid did not happen.
But there's more.
The deep 2015 crypto winter was very likely caused by the MtGox insolvency. We have to first realize what MtGox was in this era. MtGox was the only really relevant Bitcoin exchange. Yes, there was Bitstamp, BTC-E and some Chinese exchanges. But they had a very small market share. MtGox was completely dominant. And thus, I guess a large part of the then-Bitcoiners lost money in this insolvency.
We could thus assume that the 2014-2015 crypto winter could have been much less deep in "normal conditions" without such a catastrophic event. And that could, again, have caused an early recovery of the price, with perhaps an ATH already in late 2015 or 2016. Or even earlier. We don't know and never will.
Okay, so there are mainly two arguments for the "coincidence hyptothesis". But why could this actually be good news? You could think now that this might be even bad: we couldn't be sure that there's a predictable event like the halvings which is followed by a bull market ...
My theory: It could be good news because it means that it's not necessarily a "given" that Bitcoin has to crash as deep as it did in the past. So it's perhaps likely that
future bear markets could be shorter and much less pronounced.If people understood that many bear markets were caused by external influences, this would already perhaps reduce the amount of panic in downward phases. I've already mentioned MtGox. But there's more: The 2022 crash could have been much less deep if neither Terra/Luna nor the FTX insolvency happened. And there was also the Ukraine war which brought deep uncertainty into the markets.
Even if you don't agree, I think it's a fact that there is no "natural" force that drives Bitcoin prices down 70-80% or more in bear markets. In my opinion it's a combination of these "bad news" events, people panicking, and whales and speculators making profits shorting Bitcoin when they think a panic could occur. Like yesterday. There could be natural phases where the interest in Bitcoin dwindles, but that would probably not justify such deep crashes. BTC could behave more like other assets like big cap stocks, with occasional 20-30% crashes/bear markets but not much more.
What do you think? I'm still undecided, but I think the "coincidence hypothesis" is worthy to be discussed.
(This would be the case if I took the highlighted part literally.)
