Why Bitcoin's 4 Year Cycle Will Continue To Rhythm
Rapid growth reflects new participants who are less knowledgeable of previous cycles
TLDR:
Many in crypto are aware of the 4 yr cycles with BTC yet expect it to NOT hold because of the strong understanding around it in crypto. This ignores the rapid adoption of crypto and as such it is more probable that the current cycle will be similar to previous ones.
Detailed:
The 4 year cycle references the 2013 and 2017 bull runs with a ~50x and ~29x gain from trough to peak, respectively, over the 4 year time line. These are defined from the bitcoin halvings (inflation rate cut in half)
Many in the crypto space have said we won’t see the same as the 2013 and 2017 cycles.
But this is a poor perception of the crypto markets. They are growing 113% growth rate per year
With the 100%+ growth rate in the cryptocurrency markets, we should expect at least half to not be knowledgeable of historical cycles. Just ask someone on the street about bitcoin halvings.
And we are seeing this cycle play out similar to 2013 and 2017 despite more and more people knowledgeable of these bull cycle similarities.
Example 1
A recent example of this is during the mid-cycle run up, we see BTC hit the 50% logarithmic growth curve, get rejected, and crash back down to the 38.2% log growth curve. This happened over the past few weeks:
This happened in 2017 too around the same time:
Example 2
In 2017, Bitcoin broke the 2013 high and went past the 1.618 Fibonacci line before hitting a mid-cycle peak in June 2017. It crashed hard but bounced off the 1.618 line. Same has happened in 2021. Broke the 2017 ATH and 1.618 line, hit the mid cycle peak in May and crashed back down to the 1.618 line shortly after.
Example 3
A key bitcoin valuation metric is the S2F model (popularized by PlanB)
As we can see, the s2f model is still holding true and nailing the massive long term moves in bitcoin despite people knowing about this model since 2018.
Conclusion
Three prime examples showing strong similarities to previous cycles!
So at least from a macro perspective, the cycle dynamics are holding. We can expect something similar but not the same. BTC to 100k+ by year end or early next? That is what previous cycles would tell us.
Now adding on to this argument is will the 4 year cycle will dissipate once the growth rate slows? I think this is a reasonable expectation as the market will reach a mature state where institutional and smart money has entered the market. These players will control most of the capital in the crypto market and will be knowledgeable of these cycles.
This expectation will result in a front running of the cycle. And as the expected cycle breaks down, the belief in it will dissipate.
Maybe the 4 year cycle will die down later on but not this cycle. We need to see crypto adoption slow down in major crypto networks and protocols before this happens.
Next cycle? Maybe. This could be the key result of the proposed super cycle where BTC and crypto hits escape velocity and breaks the 4 year cycle.
Authored by Derman Capital (Twitter)