Is time on our side? The case of Bitcoin’s lengthening cycles

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Key takeaways The theory of lengthening Bitcoin cycles conflicts deeply with supply-side and halving-based theories. As each successive cycle lasts longer, investors experience diminished returns. The lower return on investment is accompanied by longer bear and bull cycles, with longer durations between peaks. Share this article

One of the many unique characteristics of BTC is its halving process, which is often accompanied by a bullish movement and preceded by a bearish consolidation. Bitcoin halving events have been a long established way of measuring Bitcoin cycles not from an absolute minimum, but from a supply versus demand perspective. Bitcoin halving is an event every four years that halves the reward for mining a block to secure the network. After the last halving, which took place on May 11, 2020, the current reward is 6.25 BTC. It is awarded to the first miner who solves a mathematical algorithm and decrypts the hash of the next block.

The theory of lengthening cycles is deeply in conflict with the theories based on supply and halving.

As the existing limited supply shrinks, the theory is that demand begins to exceed the available supply and the price of the asset increases. The stock-flow model measures the relative scarcity of the asset as a function of its supply. Based on this tweet from PlanB (creator of the Bitcoin Stock-to-Flow (S2F) model), the model shows that BTC is at the bottom of the 50k-200k 1sd band, a signal to buy.

As market participants, we are inevitably attached to the intrinsic responses that these sudden shifts in market sentiment and the volatile values ​​of our portfolios can provide. However, in times of volatility, it is crucial to keep in mind and remember the slogan “when in doubt, zoom out”. Bitcoin is by far the best performing asset of the past decade and its value proposition to society remains fundamentally unchanged.

Based on Everett Roger’s diffusion theory of innovations, the diffusion of a new idea is highly dependent on its human capital component. In this context, the percentage of clients who adopt a disruptive idea over time can be divided into 5 distinct categories across the spectrum of risk tolerance: innovators (2.5%), early adopters (13.5% ), early majority (34%), late majority (34% and laggards (16%). As a result, crypto asset adoption nears the end of the early adoption phase, as it tests entry into The early majority phase Importantly for investors, this is where market capitalization growth begins to accelerate along the S-curve.

These people have the highest degree of opinion leadership among the adopter categories. Early adopters have higher social status, financial liquidity, advanced education, and are more socially advanced than late adopters. They are more discreet about adoption choices than innovators. They use the wise choice of adoption to help them maintain a central communication position.

Early adopters make or break markets; they are the respected custodians of new innovations. On the other hand, if innovators care about new things and early adopters care about proven value, then the first majority care about what is popular.

The longer Bitcoin cycles hypothesis assumes that each successive cycle lasts longer, measured from the absolute low to the absolute top of the BTC price.

For example, the genesis cycle only lasted 250 days, the second lasted 750 days, and the third around 1050 days. The current cycle, which started with a low at $ 3,122 on December 15, 2018, is just approaching the 1,110 day mark.

Dubbed the “Supercycle,” this theory suggests that the massive influx of retail investment will break convention. This theory goes well with the “lengthening cycle theory” popularized by Benjamin Cowen, renowned crypto analyst and founder of Into The Cryptoverse. Generally speaking, this theory suggests that Bitcoin’s market cycles are lengthening while producing diminishing returns. As unbelievable as it may sound today, it implies that Bitcoin’s volatility will approach zero in 10 to 15 years. In order for Bitcoin to remain compliant with both supercycle and lengthening cycle theories, it needs to undergo even more massive adoption before stabilizing at the top of its theoretical S-curve.

As price action moves along the curve, volatility decreases, creating a more stable Bitcoin over time. It will take decades for the asset to fully stabilize, but it has continued to follow this trend. The only problem with this type of theory is the fact that it conflicts deeply with the theories based on supply and halving.

The majority of investors believe in the lengthening of Bitcoin cycles after the failure of the stock-to-flow model in November by PlanB. After the failure of the Wyckoff distribution model and the PlanB prediction, Benjamin Cowen reinforced his belief in the elongation cycle theory.

Volatility may even drop further over time as adoption takes place. As Bitcoin’s market cap increases, as does liquidity, volatility should continue to decline as we follow the logarithmic growth curve of the asset.

Contrary to the long-term thesis, and with no bullish catalysts on the immediate horizon, prices collapsed as traders and funds that bought Bitcoin and other assets earlier in the year weighed their profits. The sale is expected to last until January, as some investors will be waiting until the New Year to sell so they can advance their tax obligations until 2023. It is in these types of circumstances that Phemex can help investors with its investment products. encryption. With the potential to earn up to 8.5% APY through fixed and flexible savings options, investors are allowed to make instant withdrawals and deposits at any time. There are also no long-term commitments. The initial deposit and interest can be withdrawn at any time. To subscribe to one of the Earn Crypto options, a user only needs to transfer funds from their spot portfolio to their fixed or flexible savings account. Phemex trading systems employ a sophisticated combination of risk management, algorithmic calculation and quantitative analysis techniques.

On the other hand, Benjamin Cowen believes that the reason for the lengthening cycles is an increased influx of money from different leaders around the world. Countries like India, Vietnam, and Indonesia have become huge crypto hubs in 2021. Additionally, a number of celebrities have supported NFT projects and DeFi platforms.

Big companies like Mastercard, Microsoft, Expedia, AMC Theaters, PayPal, and even Starbucks have entered crypto territory. Additionally, with the backing of Elon Musk and Michael Saylor, Bitcoin has seen an influx of billions of dollars, even surpassing a market cap of $ 1.3 trillion.

As Willy Woo, a popular on-chain analyst, pointed out, Bitcoin’s 4-year cycle will disappear in the future. He predicts that the current one will be the last.

The typical four-year cycle that most analysts use to predict Bitcoin price rises and falls will be replaced by a “drunken march” upward, much like the S&P 500 or other major stock indexes. .

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