Topic: Is Bitcoin's 4 year cycle only coincidence? (This could be actually good news.) (Read 348 times)

Supply and demand is pretty much undefeated and that’s what the four year cycle is. There’s always newbies to the market and they probably dismiss the four year cycle initially similarly to how you have tried to. This is why as Bitcoin gains adoption, we still see the cycle. Eventually we may reach a point where the block reward doesn’t matter much, but for now it is everything.

Basically, if everyone knows that Bitcoin will rise high and then crash fast, there's an incetive to sell shortly before the expected peak, or when the price just started crashing. This expectation makes going up quite hard the higher the price gets, because only short-term traders are buying at that point, and are ready to sell when they get 10-20% gains.

Also the market will eventually realize that the public price peak goals are way over exaggerated. I remember in 2017 when the price was crossing $20k everyone though that it's just the beggining and $100k will happen soon. In 2021 all the big name influencers were predicting $200k, $300k and even higher. The same happens today - people like Saylor again predict six figures, and a lot of investors would likely patiently wait for them and miss the opportunity to take profits at the actual peak.
 

But you still think the "halving-driven cycle" theory as a whole holds, it seems

I agree here. I think from 2016 onwards it was this effect largely which has driven the post-halving rally: In 2013 it worked, so in 2016-17 it would work again. And 2020 again, even in the middle of a pandemic. This "tradition" to buy/invest (and feeling bullish) if a halving is in sight could be actually more important than the reduced miner supply at the markets.


I disagree partly with the last sentence. Knowing this pattern could just make it also attractive to trade against it. I feel we're seeing this already, the bull market seems to be in a much more advanced stage in 2024 than it was at 2020's and 2016's halvings. So actually the big dump could come earlier and earlier. This is also why I'm expecting a local high in late 2024 or early 2025, and not late 2025 (like if the cycles were exactly 4 years long). This however woud not be something "serious", but something rather natural. It also does still not invalidate the "halving-driven cycle theory".

Want to elaborate on that? Do you fear less speculative capital inflow in later bull markets if the market becomes more unpredictable?

Because I'm referring to the "final cycle ATH", and of course we don't know if we have reached it already. If the cycle lasts until 2025 like predicted by the "4-year theory", then we would expect a higher "final cycle ATH" somewhen in the next 1-2 years.

Sure? What about the Terra/Luna drop, the FTX insolvency? The +75% price drop (very close to the previous drops around ~80%)? I believe that this was a quite "normal" bear market, much like the previous ones - and had also a similar extension (about exactly a year, even a couple of weeks longer than the 2017-18 bear).
What was a bit different is that in 2022 the attention level on Bitcoin and crypto in general remained relatively high, even if the price evolution was catastrophic like in previous bear markets. So crypto seemed a little bit less "dead" in the crypto winter (although the Bitcoin Obituaries got some new entries, even by an European Central Bank official ). But it were mainly negative events driving this attention, plus the NFT adoption in non-crypto sectors.

I'd support you with this theory, why? Because if we go back just a few years back on 2021, the narrative and cycle was truly different at that time. So, knowingly 2021 was the bull run and should be followed by a terrible bear market on 2022 but did we felt that? I don't think so, it's totally different and far from expected bear and slump market on that year, we didn't even felt that it was one.

IMO that we're like back in the narrative and fundamentals on 2016-2017 where not just all about the craze of ICOs but also driven by the bad news.

We've got a better cycle this one because drivers like halving + etfs are more enthusiastic than of the past. 2022 bear's lowest was around $16k and it was just 4.2x away from the ATH of $69k of 2021.

Why the question marks after the fourth cycle? The Bitcoin ATH price already broke the 69000 USD mark and reached 73K USD. I guess that the 73K USD ATH price level could be destroyed by a higher ATH after several months, but this is just a possibility.
It's weird that we faced a price correction in the middle of March, and right now(the middle of April) we are facing another price correction.
Is this a coincidence or a pattern? I don't know how big are going to be the future price drops, but we can't be sure that the future bear markets will be modest in comparison to the old bear markets. Bitcoin will always remain volatile and I'm sure that the Bitcoin price will always move in a rather unpredictable way, leaving most of the BTC traders surprised in the short term.

Without mincing words, I've always noticed that Bitcoin gained the cycle popularity for two main reasons, which are; 1. Through halving (the main scarcity plan with the economics of limited supply and high demand originally planned by Satoshi) and 2. The tradition attracted by halving.

Owning to number 1, Bitcoin was never planned to move in cycles, it is just coincidental as it was only planned to be scarce. The scarcity could be evenly achieved without translating into a cycle and would have just helped it grow. And initially, Bitcoin never behaved so hugely as it later did afterwards, the performance was gradual based on how gradually it was attracting investors' attention. But the fact that people buy and dump it depending on how it behaved before and after halving made it naturally create some kind of cycle, a tradition that now translates to the periodic cycle as we see it now.

In other words, the halving is so important here, it becomes the cause to attract investors at some specific time (pump/FOMO). After a while that the effect of the halving has been effectively weighed in the market, people start dumping Bitcoin again due to FUD and the fear of losing back their gains. At this point, it will attract little or not investment which will overall lead to massive dump. This two scenario become the tradition as Bitcoin gain more popularity and more people adopt it. They now embrace this as a reality which I do not think will ever change unless something serious forces the change.

However, I don't think that can be good if this cycle changes.

This cycle is not so much a 1/2

12.5 + .5 = 13 coins dropped to 6.25 + .5 = 6.75 which is maybe 45%

but now

6.25+ .75 = 7 coins drops to 3.125+ .75 = 3.875 this drop is maybe 38%

so the ½ ing is a .62 or a .65

I agree we are watching a shift in the four year cycle 🔄

This is also the assumption I have: speculation mixed with events, and the halving being one of these events. Basically I think in the last 2-3 cycles the following chain reaction could have happened:

- Phase 1: Depression. Some smart traders accumulate once the price stabilizes around a low.
- Phase 2: These traders detect an event which could stimulate demand, and start to amplify theories about this in social media and/or media outlets in the case of bigger whales. The halving being one of them, ETFs and other "adoption"-related news are other such reasons. Bull begins to roar, but still insiders are the majority, large "retail" sectors are still not showing attention.
- Phase 3: Retail joins the bull market as they see the price goes up. The reason for the uptrend now doesn't matter anymore. FOMO is winning over rational explanations. (In my opinion we are already in this phase but still early, despite the recent dumps - these are mainly relatively small corrections.)
- Phase 4: Whales begin to sell, and retail soon joins just when prices begin to plunge. Bear market begins until most of those wanting to sell are out and depression arrives.

While this can be said about all bubbles (Elliot wave model is for example based on these assumptions), Bitcoin market has some specific characteristics:

- The halving as a bullish event. Halvings always occured during bull markets and the bull market continued then. Even if it was a coincidence, and demand/supply equation is not fundamentally touched by the halving, those saying that "halving is bullish" have empirical reasons for their assumption, so they can successfully "sell" it as a bullish event. So we could still see a pump each 4 years even if the "cycles" are already a thing of the past.
- Bitcoin-related events, like exchange insolvencies, new ETFs etc. These can amplify or reduce the influence of the general "wave pattern". See my theory about MtGox above.
- Interconnection with altcoin and NFT markets. These are retail-driven markets, so they obey rules about "trends" and "fads". A waning fad can influence the crypto market as a whole negatively (2018's ICO collapse?), but if there is hope again, it can influence BTC price positively (2019 recovery?). It's possible, for example, that the Ordinals wave contributed to the growth of BTC in 2023.
- The fact that Bitcoin is considered a risky asset. So it's vulnerable to events like wars (we're seeing that now) but also to interest rate changes.

Yes, this is quite interesting, it would be logical but it seems no bigger trader group has really challenged the 4-year cycle until this point (Again, it were only 2 complete cycles though). However I think there are good reasons that the current cycle could be shorter, i.e. with a maximum in late 2024 or early 2025 already, and not late 2025 like the "established theory" says.

There were however some "false truths" challenged, for example that Bitcoin never falls below a previous ATH (broken in 2022, probably because of a combination of Terra/Luna and FTX).

This is why the halvening cycles should logically just stop - halvening does not affect the selling pressure anymore, it doesn't change the balance of supply and demand like it did in the first halvening eras.

So it could mean that the next cycles, maybe even the recent one too are driven by pure speculation - price goes up because traders expect it go up and invest, then when they see that the price got very high and stopped growing, they rush to take profits while they can and cause a crash - and with the crash the mood changes to bearish for quite some time. But this too can't go on forever, because when the pattern becomes recognized by everyone, traders will trade against this pattern, since it would be more profitable, and thus will ruin the pattern.

So after the halving in a few days, there will be only 10.5 million Bitcoins left? (This would be the case if I took the highlighted part literally.)

I agree that the halving-driven cycles assumption is the most popular theory. And I also don't want to ruin the halving party.

But is this theory correct? Think about how many Bitcoins are actually sold by miners every day, and how many Bitcoins are sold by traders, short- or mid-term-hodlers taking profit or cutting losses, or panicking, ETF managing companies selling outflows (GBTC for example), and so on. The second group makes up actually about 99.8%+ and miners only 0,1 to 0,2%.[1] After the halving in 2024, miners' share in sold coins will go down to 0,05 to 0,1%.

Also think about the bull-bear cycles in general: There's often a large part of the bull market actually before the halving. The current bull market started in November 2022, at $15.000. Far away from any halving.

So I think the halving theory at least can be challenged, which is what I'm doing with this post. I actually think halvings have a small incidence, but it's less with every cycle. The 2012 halving indeed had quite a big incidence though in my opinion, because it ended basically the "free" bitcoin mining with the home PC.

What has incidence indeed is that miners's supply in comparison to the already mined coins is reducing. But that can only be a reason (together with what we call "adoption") for the long term price trend, it can't really explain the bull/bear cycle.

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[1] To do the math: In the last 24 hours about 700000 coins were sold on exchanges. Miners sell 900 coins per 24 hours. That's 0.128%.

Well, we need to realize that Bitcoin 4-year cycle of bear and bull markets is not driven by the news events. We try to link that because of certain events and fundamental good and bad news, the market experiences this phase and therefore we are not sure it if will be repeated again or not.

I would tell you that this Bitcoin 4 years cycle is because of the Halving event where the supply cuts in half and the demand keeps on increasing and this results in a parabolic bull market. This happened in the past and it will happen in the future too. So as long as there is halving, we will experience this 4 year's bitcoin cycle. It does not matter if there is pandemic in the world or lots of Geopolitical tensions, the bitcoin halving is independent of these factors.

This is interesting analysis! The 4-year cycle theory for Bitcoin's price is definitely a popular one, but I think it's smart to look at other perspectives too.  Just because something held true in the past doesn't mean it'll keep being accurate all the time. I agree that the early days of Bitcoin were pretty rampant and hard to predict, so maybe that activity doesn't perfectly line up with the 4-year cycle timeline we see now.  Plus there's all kinds of stuff like pandemics, hacks, politics that can crash prices even if the cycle theory is real and  could be both things play a role.  The cycles drive overall trends but big external events trigger unpredictable swings.  No one really knows for sure I guess.  We'll just have to wait and see if the cycles hold up over decades or if random chaos and headlines win out in the end.

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.

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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.

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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.

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What do you think? I'm still undecided, but I think the "coincidence hypothesis" is worthy to be discussed.