Bitcoin has been around for a little more than 13 years by this point which allows for enough historical trading data to perform research on long-term trends like market cycles. Speaking specifically in reference to BTC, one of the most widely accepted theories regarding cycles is the Stock-to-Flow model from Twitter user PlanB that is based around the idea of BTC halving events taking place on a predictable 4-year basis.
However, as time goes on and the global cryptocurrency market develops further, the 4-year market cycles that held true in the past don’t look to be the most accurate way to predict future cycles.
Bitcoin’s previous 4-year cycles saw the same general market phases take place, in the same order. Each cycle consisted of:
Historically, each cycle takes roughly 4 years to complete due to the pre-determined bitcoin halving events, which are when the reward given to a miner for completing a block gets cut in half. Currently, successful miners receive 6.25 BTC for completing a block.
Bitcoin miners provide the inherent infrastructure to BTC’s blockchain by approving transactions and providing computational power to the decentralized network. Miners are also competing against one another to complete a block before anyone else so that they’re able to claim that block's reward.
Halving events are said to take place every 4 years, but actually they take place after every 210,000 blocks are completed on Bitcoin’s blockchain. Halvings are inherently deflationary events, as they ensure that Bitcoin’s supply of new coins will steadily decrease as time goes on. As long as demand stays relatively stable, halving events will decrease supply of new coins and likely force a breakout on price.
It is important to note that halvings occur after a set number of blocks and not an actual duration of time, because to many it appears that the classic 4 year BTC cycle may have just completed itself in just 2 years. This is very unusual, especially considering that the next halving event is predicted to take place in 2024.
With the most recent Bitcoin halving event having taken place in May 2020, we’re currently only about 2 years into what is supposed to be a 4 year pattern. However, it is very apparent that a micro cycle may have already completed itself in half of the normal time. If this does in fact turn out to be a separation from Bitcoin’s typical macro pattern then we are right at the precipice of a new cycle starting, and a new bull market to go with it.
You may be wondering why this 4 year cycle would change after remaining intact for Bitcoin’s entire history until now. Well, we’re at a point in which hyperadoption of cryptocurrencies and blockchain technology is taking place globally. Comparing cryptocurrencies to the classic S-curve of technological innovation, we are likely still in the late-stages of Growth. An emerging technology will grow at its more rapid pace between Growth and Maturity, which looks to be the next macro stage in the growth of blockchain technology.
Right now we see consumers, businesses, and even entire governments looking to the cryptocurrency industry as the last bastion of growth industries thanks to a whole mess of global macroeconomic strains in recent years that have left other speculative sectors gasping for air.
Thanks to the rapid acceleration in the global demand for cryptocurrencies and blockchain services, there has been an even faster growth of the global crypto mining industry. Institutional miners like those featured on our Sectors Radar are mining more BTC than ever, with more network participants than ever. This can help explain why we experienced what is typically a 4 year cycle in only half the time… there's simply more people involved in crypto so things are happening a lot quicker!
Of course the difficulty of completing a block is designed to correlate to the supply of new coins in order to prevent a flood of new BTC on the market. As of now, we still aren’t expecting the next halving event until 2024, but it appears that price may not care to wait until then to begin its next macro cycle.
As traditional financial services and the internet continue to convert to decentralized finance and Web3, these macro cycles may get even shorter.
As we continue to monitor the technicals for emphatic proof of the crypto market bottom being in, we’re still as optimistic as ever in regards to the industry as a whole and how we’ll continue to innovate and adopt around the world for years to come.
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