Lengthening Cycles Are Dead. End of a Great Narrative?
Benjamin Cowen, one of the most popular and respected cryptocurrency market analysts, has admitted that his flagship market model “is dead.” He did so in the context of Bitcoin’s falling price, while also falsifying the hypothesis he has been arguing for since 2019.
Benjamin Cowen is one of the most popular analysts, commentators and youtubers in the cryptocurrency space. His Twitter profile has 636,000 followers, while his YouTube channel has 734,000 subscribers.
Cowen’s peculiar style of social media management is the lack of any income from YouTube ads or promotion of third-party services (exchanges, services, brands or cryptocurrency tokens). His candid, minimalist – he’s been recording his videos in a room with two chairs, a cardboard desk and a laptop camera for years – and highly critical approach has won him a huge fan base.
“Lengthening cycles are dead” vs. Stock-to-Flow
One of the main hypotheses on which he has built his popularity is the claim about Bitcoin’s lengthening cycles. This hypothesis assumes that:
- there are cycles in the Bitcoin market consisting of accumulation, dynamic uptrend, and sharp decline,
- successive cycles last longer,
- successive cycles produce diminishing returns (ROI),
- a long-term model of the BTC market are bands of logarithmic regression, the upper border of which determines the peaks, and the lower – the bottoms.
Benjamin Cowen has been an ardent proponent of this hypothesis since at least 2019. He took his belief in the validity of this model from the fact that, as he claimed, it best fits the historical data. In an interesting discussion in August 2021, Cowen spoke with another influential analyst, PlanB, the creator of the Bitcoin Stock-to-Flow (S2F) model.
It is widely believed that the S2F model collapsed in late 2021 as the price of BTC deviated well below it. Or at least, as PlanB himself explains, the so-called Floor Model, which assumed that Bitcoin would reach a price of $100,000 in December 2021, collapsed.
After the collapse (at least partially) of the S2F model, many crypto investors and enthusiasts turned to Cowen’s lengthening cycle model. It seemed that the target range of $100-200k was still achievable for Bitcoin, but would take more time to reach. This narrative was supported by arguments for an increase in market capitalization of the crypto sector, a longer time horizon for institutional investors, and long-term HODL sentiment.
Spell is broken
Unfortunately, on May 8, the spell was broken! The creator and biggest proponent of the lengthening cycles model, Benjamin Cowen, tweeted an equally brief but telling post. In two short sentences, he admitted that the model he had been working on for years “is dead.” At the same time, he bittersweetly added that he “hopes this is a signal of a macro bottom, but I don’t think it is.”
Benjamin Cowen: Is it really over?
A great discussion heated up under the tweet. Benjamin Cowen himself wrote a comment, warning in advance that even a new all-time high (ATH) before the next halving will not change his conclusion:
“Even if we did hit a new ATH before the next halving, it does not change the brutality of the current bear market.”
The reason for this claim is the ongoing decline of the Bitcoin price. The analyst believes that it can no longer be treated as a deepening correction within the macro bull market. Although he himself argued back in November 2021 that the $69,000 level was not the peak of Bitcoin’s cycle, now he does not hesitate to refute his own beliefs. He further added:
“Even if #Bitcoin holds the summer 2021 lows (which is honestly a big if), whatever comes after it would certainly feel like a new cycle.”
In the comments below the post, many supporters of the hypothesis of lengthening cycles could not believe that Benjamin Cowen abandoned his flagship narrative. Others asked for details or tried to prove that this is not the end and the model is still correct. But the vast majority expressed words of support and admiration for Cowen’s honesty and self-criticism. One of them was @RKrupa_Official, who wrote:
“What is amazing about you is the fact that you never fear to admit that you were wrong instead pushing the same narrative. I admire this!”
In contrast, an interesting summary was posted by user @CardanoHumpback. He straightforwardly stated that cycles never existed and that Cowen and PlanB models were just narratives incapable of predicting the future. In his opinion, “#crypto will survive as usual.”
Diminishing returns and logarithmic regression remain
However, it turns out that not all elements of Cowen’s model should be discarded with the falsification of the hypothesis of lengthening cycles. In a subsequent tweet, the analyst stated that he “doubts anyone will debate” the thesis of Bitcoin’s diminishing returns in future cycles. He added:
“Four cycles in a row where diminishing returns played out.”
Another element of Cowen’s model that is still valid and has a huge margin for BTC price movements are the logarithmic regression bands. In the updated and tweeted version of this chart, we see that the Bitcoin price is approaching the upper bound of the green band. Historically, entering this range has been a bear market confirmation.
However, due to the upward nature of the logarithmic regression curve, staying in the green range was not necessarily associated with a continuation of the decline in the BTC price. In both 2012 and 2015, the moment of entering the green range appeared to be the beginning of a long-term consolidation.
Bitcoin: Close to a macro bottom?
During this consolidation, the Bitcoin price no longer experienced such steep declines as it did shortly after the peak. In contrast, reaching the bottom of the green band in the following months was caused not so much by Bitcoin’s capitulation as by the rise of the logarithmic band.
If a similar situation were to play out in the months ahead, then perhaps Bitcoin is indeed close to reaching a macro bottom. The fact remains that we are witnessing the end of the grand narrative of the Bitcoin market, of which Benjamin Cowen was the face for years.
However, perhaps the falsification of his flagship model is not a dramatic development. For years, it has been a way of rationalizing and navigating the highly volatile and somewhat wild cryptocurrency market. Perhaps, on the contrary, its rejection will allow participants in this young financial world to enter a new and more mature phase. As Cowen himself often says, and PlanB has this phrase in his Twitter profile description:
“All models are wrong. Some are useful.”
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