Recent analyses of Bitcoin’s price movements have raised questions regarding whether it has diverged from its established four-year cycle or if the current bull market is showing signs of fatigue. By examining historical price growth, liquidity metrics, and macroeconomic indicators, investors can gain clarity on the current landscape and its implications for future investments.
Historically, Bitcoin has demonstrated a pattern where the price increases significantly after reaching a cycle low. The latest cycle, however, has already exceeded the duration from low to high seen in previous cycles. For instance, the cycle observed from 2018 to 2022 peaked at 1,059 days post its bear market low, while the current cycle is set to surpass even this timeframe soon, suggesting that Bitcoin’s growth trajectory may be shifting.
Historically, Bitcoin’s four-year cycles have been closely linked to halving events, when the reward for mining Bitcoin is cut in half, leading to supply shocks that often triggered price surges. However, the aftermath of the latest halving indicated a departure from this trend—Bitcoin saw five months of price stagnation rather than the quick rallies typically expected. This trend has led to speculation about the diminishing impact of halving events on price movements. With over 95% of Bitcoin’s total supply already in circulation, the buying power and supply changes appear less impactful than before, challenging the traditional narrative surrounding market cycles.
Furthermore, a deeper dive into global liquidity trends reveals that Bitcoin’s price aligns closely with the trends in the global M2 money supply. Major Bitcoin market bottoms have historically coincided with dips in liquidity growth, suggesting that macroeconomic factors—like global money supply—may play a more critical role than previously thought in driving Bitcoin prices.
Complementing this liquidity perspective is the relationship between Bitcoin and the U.S. Dollar Strength Index (DXY), which has shown an inverse correlation. When the dollar strengthens, Bitcoin often enters a bear market; conversely, when the dollar weakens, Bitcoin tends to thrive. Currently, the DXY is experiencing a short-term uptrend and is nearing key resistance levels that could signal a forthcoming decline. A weakening dollar may ignite a new bullish phase for Bitcoin, underscoring the significance of monitoring these macroeconomic indicators closely.
Additionally, comments from Federal Reserve Chair Jerome Powell suggest that an end to quantitative tightening might be on the horizon. Historical data indicates that expansions in the Fed’s balance sheet have often led to significant upward movements in Bitcoin and equity markets alike. If liquidity cycles once again trend positively, Bitcoin’s current momentum could extend and potentially catalyze broader risk asset price increases.
In summary, while Bitcoin has indeed surpassed the duration of its previous cycles, the narrative around its price movement is evolving. It appears to be less about the programmed scarcity linked to halvings and more about global liquidity, fiat currency valuation, and macroeconomic flows. The established “four-year cycle” may not be entirely broken but could be undergoing necessary modifications. If macroeconomic conditions align favorably—such as a weakening dollar and increased liquidity—a potential bullish trend for Bitcoin could remain viable.
For investors, the recommended strategy continues to be data-driven and patient, keeping a vigilant focus on market liquidity trends.
