Bitcoin has historically followed a familiar four-year cycle. Now, two years into the current cycle, investors are closely monitoring market patterns and indicators to gain insights into what the next two years may hold. This article delves into the anatomy of Bitcoin’s four-year cycle, past market behavior, and future potential.
4 year course
Bitcoin’s four-year cycle is influenced in part by scheduled halving events, which reduce the block reward miners receive by 50% every four years. This halving reduces the supply of new bitcoins entering the market, often creating supply and demand pressures that can push prices higher.
This can be clearly visualized through Stock-to-flow modelwhich compares current Bitcoin in circulation to the inflation rate, and models a “fair value” based on similar fixed assets such as gold and silver.
Currently, we are halfway through this cycle, which means we will likely enter a period of exponential gains with the typical one-year catch-up phase following the halving advance.
A look back at 2022
Two years ago, Bitcoin faced a severe collapse amid a series of corporate internal collapses. November 2022 saw the downfall of FTX, as insolvency rumors led to widespread selling. The domino effect was brutal, as other crypto institutions, such as BlockFi, 3AC, Celsius, and Voyager Digital, also collapsed.
Bitcoin’s price fell from around $20,000 to $15,000, reflecting broader market panic and leaving investors worried about Bitcoin’s survival. However, as expected, Bitcoin rose again, once again rising five-fold from its 2022 lows. Investors who weathered the storm were rewarded, and this recovery supports the argument that Bitcoin’s cyclical nature remains intact.
Similar feelings
In addition to price patterns, investor sentiment also follows a predictable rhythm across each cycle. analysis Net unrealized gains and losses (NUPL)It is a measure that shows unrealized gains and losses in the market, and indicates that emotions such as euphoria, fear, and surrender recur regularly. Bitcoin investors typically experience intense feelings of fear or pessimism during each bear market, then shift back toward optimism and euphoria as prices recover and rise. Currently, we are once again entering the “belief” phase after the start of the early cycle and subsequent consolidation.
Global liquidity cycle
Global money supply and cyclical liquidity, as measured by Global M2 on an annual basis versus BTCIt also followed a four-year course. For example, M2 liquidity bottomed out in 2015 and 2018, just as Bitcoin bottomed out. In 2022, M2 once again reached a low point, exactly in line with the bottom of the Bitcoin bear market. After these periods of economic contraction, we are seeing financial expansion across central banks and governments everywhere, creating more favorable conditions for the price of Bitcoin to rise.
Familiar patterns
Historical price analysis indicates that Bitcoin’s current trajectory is strikingly similar to previous cycles. From the lows, Bitcoin usually takes about 24-26 months to surpass the previous highs. In the last cycle, it took 26 months. In this cycle, Bitcoin price follows a similar upward trajectory after 24 months. Bitcoin reached its historical peak about 35 months after its lows. If this pattern continues, we could see significant price increases until October 2025, after which another bear market could begin.
After the expected peak, history suggests that Bitcoin will enter a bearish phase in 2026, lasting for about a year until the next cycle begins again. These patterns are not a guarantee but provide a roadmap that Bitcoin has adhered to in previous cycles. They provide a potential framework for investors to anticipate and adapt to the market.
conclusion
Despite the challenges, Bitcoin’s four-year cycle has persisted, largely due to its supply schedule, global liquidity, and investor psychology. As such, the four-year cycle remains a valuable tool for investors to interpret potential price movements in Bitcoin and our base case for the rest of this cycle. However, relying solely on this course can be short-sighted. By incorporating on-chain metrics, liquidity analysis, and real-time investor sentiment, data-driven approaches can help investors respond effectively to changing conditions.
For a more in-depth look at this topic, watch a recent YouTube video here: Bitcoin 4-Year Cycle – Is Halfway Done?
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