Bitcoin (BTC) Cycles Are Lengthening – Hypothesis Confirmed

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Many cryp­to mar­ket par­tic­i­pants pro­fess faith in the cycli­cal nature of bit­coin (BTC), which is gov­erned by the halv­ing that takes place every four years. How­ev­er, few have yet set­tled on the hypoth­e­sis that these cycles length­en over time. It is about time to do so, as the new all-time high for BTC has just val­i­dat­ed this hypothesis.

Accept­ing the the­sis of bitcoin’s length­en­ing cycles has some con­se­quences. The most impor­tant – from the per­spec­tive of long-term investors – is the length­en­ing time to reach the peak of the cycle and the dimin­ish­ing return on invest­ment (ROI).

What are bitcoin’s lengthening cycles?

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

For exam­ple, the gen­e­sis cycle last­ed only 250 days, the sec­ond last­ed 750 days and the third around 1050 days. The cur­rent cycle, which start­ed with a bot­tom at $3122 on 15 Decem­ber 2018, is just now approach­ing the 1050-day mark. 

Thus it is close to match­ing the dura­tion of the pre­vi­ous cycle. We still have to wait for this con­fir­ma­tion of the hypoth­e­sis of length­en­ing cycles.

How­ev­er, there is yet anoth­er way to mea­sure bitcoin’s cycles – not from an absolute low, but from halv­ing. Bit­coin halv­ing is a once every four years event that halves the reward for min­ing a block. After the last halv­ing, which took place on May 11, 2020, this reward is 6.25 BTC. It is award­ed to the first min­er who solves a math­e­mat­i­cal puz­zle and deci­phers the hash of the next block. 

It is worth adding that the con­se­quence of halv­ing is the sys­tem­at­i­cal­ly decreas­ing sup­ply of bit­coin, result­ing in the defla­tion­ary nature of the old­est cryptocurrency.

Cryp­tocur­ren­cy ana­lyst @ByzGeneral post­ed on Twit­ter a chart of three bit­coin cycles mea­sured just from halving.

Source: Twit­ter

In the tweet, he high­light­ed that “the 2017 bull mar­ket last­ed about 35% longer than the 2013 bull mar­ket”. He fur­ther added:

“If we assume that this one is also going to last about 35% longer than the pre­vi­ous one then by the end of Q1 2021 the bull mar­ket should end.”

Confirmation of the hypothesis

It turns out that by tak­ing halv­ing as the start of each cycle, the hypoth­e­sis of bitcoin’s length­en­ing cycles has just been con­firmed. Already in the chart above, we can see that the cur­rent cycle (green) lasts longer than the pre­vi­ous cycle (blue). The ulti­mate con­fir­ma­tion of this was when bit­coin reached the new ATH of $67,000 on 20 Octo­ber 2021.

This event was recent­ly high­light­ed by anoth­er cryp­to mar­ket ana­lyst, Ben­jamin Cowen. He is known for pro­mot­ing the idea of bitcoin’s length­en­ing cycles, which he believes is indi­cat­ed by his­tor­i­cal data. He recent­ly pro­mot­ed this idea in an exclu­sive inter­view for BeIn­Cryp­to.

In his lat­est YouTube video, he ana­lyzed bitcoin’s pre­vi­ous cycles both in rela­tion to halv­ing as the start of the cycle and in rela­tion to the absolute bot­tom. Inter­est­ing­ly, he pub­lished this analy­sis a few days ago, even before bitcoin’s new ATH. Cowen said:

“Today is the last day. New all-time high is what we need in order to put in a length­ened cycle as mea­sured from the halving.”

Length­en­ing BTC cycles mea­sured from halv­ing / Source: YouTube

Addi­tion­al­ly, Cowen shared a chart and his analy­sis of bitcoin’s cycles as mea­sured from the absolute bot­tom. He acknowl­edged that how­ev­er in this frame of ref­er­ence BTC’s length­en­ing cycles have not yet been con­firmed, he believes they will be. Final­ly, he added the obser­va­tion that:

“More and more peo­ple are get­ting on board with the idea of the cycle lengthening.”

Length­en­ing BTC cycles mea­sured from absolute bot­tom / Source: YouTube

Declining ROI over time

If bitcoin’s length­en­ing cycles are con­firmed, then two impli­ca­tions must be accepted:

  1. Bit­coin needs more time each cycle to reach its absolute peak.
  2. The return on invest­ment (ROI) is low­er each cycle.

While the for­mer impli­ca­tion is a nat­ur­al con­clu­sion of the hypoth­e­sis of length­en­ing cycles, the lat­ter may seem sur­pris­ing. For it turns out that not only did bit­coin give a high­er ROI in pre­vi­ous cycles, it also did so faster. Cur­rent­ly, investors must have more patience and addi­tion­al­ly expect a low­er ROI.

Accord­ing to data pre­sent­ed by Cowen in his dis­cus­sion with PlanB, bitcoin’s first cycle deliv­ered an ROI of 700x. In the sec­ond, 500x could be achieved, and in the third, 100x. 

Mea­sured from the bot­tom at $3,122 this cycle so far it has been pos­si­ble to gen­er­ate an ROI of around 20x. There­fore, the ana­lyst concludes:

“There is a high­er chance than not that this cycle will ulti­mate­ly extend fur­ther out than the last cycle. And I would say it would do that whether we want to mea­sure from the bot­tom or from the halving.”

The main rea­son for this is the grow­ing mar­ket cap­i­tal­iza­tion of bit­coin and the entire cryp­tocur­ren­cy asset class. This sig­nals the mat­u­ra­tion of the sec­tor and a reduc­tion in the volatil­i­ty which is nat­ur­al to cryptocurrencies. 

It is much eas­i­er to achieve 100x gains (and cor­re­spond­ing­ly huge drops) on an asset with a mar­ket cap­i­tal­iza­tion mea­sured in the tens of mil­lions of dol­lars than on bit­coin, worth $1.15 tril­lion today, accord­ing to CoinGecko.

Conclusion

The hypoth­e­sis of bitcoin’s length­en­ing cycles is con­firmed if one takes halv­ing as the begin­ning of the cycle. Con­fir­ma­tion with respect to the absolute bot­tom is still to be await­ed, but in a dozen days or so this will also become clear.

In the next cycles, one can prob­a­bly expect only fur­ther length­en­ing of cycles. This will prob­a­bly con­tin­ue until the four-year halv­ing cycle and the amount of the block reward become ulti­mate­ly insignificant.

Disclaimer


All the infor­ma­tion con­tained on our web­site is pub­lished in good faith and for gen­er­al infor­ma­tion pur­pos­es only. Any action the read­er takes upon the infor­ma­tion found on our web­site is strict­ly at their own risk.



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