Bitcoin (Cryptography: BTC) When I hit the $100,000 mark in December, all the lights appeared to be flashing green. Many investors were convinced that Bitcoin would be a parabolic. Certainly, on January 20th it finally reached a new all-time high of $109,000.
However, since then, Bitcoin has been declining, and is now trading the $83,000 mark. This amazing event shift has led some investors to rethink everything they know about Bitcoin, including the famous “Bitcoin Cycle” investment paper that claims to predict the next move for the world’s most popular cryptocurrency.
The Bitcoin Cycle investment paper states that Bitcoin tends to follow the usual four-year boom-and-bust cycle. So, if you can predict where Bitcoin is in any four-year cycle, you can predict where Bitcoin is heading next. It’s so popular that many investors suggest this bitcoin cycle, but sometimes they don’t even realize they’re doing that.
Image source: Getty Images.
There are various versions of this Bitcoin Cycle paper, but they are all based on the fact that every four years, Bitcoin is halved. This creates a four-year cycle, with four different stages in between. The accumulation stage when Bitcoin is traded at a discounted price. Usually, a growth stage that works as soon as half of Bitcoin occurs. The bubble phase leads to market happiness and Bitcoin’s highest ever high. Crash phase. This final stage is when Bitcoin loses 80% of its value and the entire cycle begins anew.
This pattern has been very consistent throughout Bitcoin’s 15-year history. Look back at the last Crypto Bull Market Rally. The majority were kicked off by Bitcoin Harving in May 2020. This has created stratospheric profits for Bitcoin.
That bubble phase followed by a crash phase, and Bitcoin quickly fell to $16,000. The long winter of 2022 and early 2023 were accumulation stages when Bitcoin was trading at bargain prices.
The current problem is that it is becoming increasingly difficult to know where you are on the current Bitcoin cycle. For example, when Bitcoin reached $100,000 last year, it was easy to conclude that we were either in the late-growth or early-bubble stages. Bitcoin was meant to surge during the Trump administration and be completely radiation-high. People even predicted that Bitcoin could reach $1 million in this market cycle.
The story continues
But now, more and more voices claim we are in the crash phase. Bitcoin has fallen by more than 20% from its January high, with some people currently convinced that Bitcoin has not yet fallen. If Bitcoin loses 80% of its value, as did in the previous market cycle, then we may be talking about a Bitcoin transaction of nearly $20,000. It’s no wonder some people are now moving their money into money!
The problem is, frankly, it seems that Bitcoin is not playing under the same rules. An important clue came in April 2024 when it turned out to be nothing in Bitcoin harving. The event was supposed to unleash the growth phase of Bitcoin, but nothing really happened to Bitcoin prices until the US election in November.
In hindsight, the launch of the new spot Bitcoin ETF in January 2024 may have broken the cycle. Bitcoin rose significantly in January, February and March 2024 thanks to the influx of investors’ money into these Bitcoin ETFs. Therefore, all the profits expected from half in April 2024 were actually experienced a few months ago as a result of the ETF.
Some investors now claim that US President Donald Trump will completely defeat the Bitcoin cycle. From this point of view, the Bitcoin boom and bust behavior will soon be over, and we are on the forefront of entering the era of perfect Goldilock – profits not too high, not too low, just right.
Others have argued that “Bitcoin Cycle” will soon turn into a “Bitcoin Supercycle” and that we are heading towards the dramatic, head-turning profits of Bitcoin for the next few years without the real risk of a major recession.
Are you still confused? It’s easy as most people rely on the Bitcoin Cycle investment paradigm to understand things. Unfortunately, this paradigm can be broken.
The big takeout here is that you shouldn’t try to timing your Bitcoin cycle. If it doesn’t exist anymore, or the timing could be somehow confused.
As a result, you should not try to figure out whether you are in the accumulation, growth, bubble or crash phase of Bitcoin. If you believe in the long-term story of Bitcoin, you should buy and hold it with confidence in the prospects of long-term growth going forward.
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Dominic Basulto has a position in Bitcoin. Motley Fool has a position and recommends Bitcoin. Motley Fools have a disclosure policy.
This Bitcoin investment paper is everywhere. This is why you shouldn’t bother you, originally published by The Motley Fool
