Why the Bitcoin price is likely to rise a lot over the next 2.5 years
This is not financial advice
Bitcoin insiders know about the 4 year Bitcoin Cycle. When I say insiders, I mean people that have been down the rabbit hole for more than 4 years. As someone who has been in the world of Bitcoin for 10 years, I've come to understand the power of the 4-year Bitcoin Cycle. This pattern has held true for the past 14 years and has proven to be a reliable guide for Bitcoin investors.
The day to day moves in Bitcoin are hard to trade and make money from consistently, but he pattern of price movements that has been hugely consistent over the last 14 years has been the 4 year cycle.
Based on the Bitcoin block halving, this cycle has been tradable. The fundamental reason that it has worked is because, every four years the amount of Bitcoin earned by the miners for processing transactions is cut in half. So supply is reduced without any corresponding change to demand. Usually, what follows in the 6 months after a halving, is a big spurt upwards in price.
During the big move up people have tended to get very excited and a lot of headlines are made. Eventually, the upward momentum eventually exhausts itself, and the price experiences a drastic decline, sometimes by more than 85%. This downward phase typically lasts for about a year and is characterised by fear, uncertainty, and doubt. Many people succumb to panic selling, exacerbating the price drop. It can be a challenging time emotionally, with headlines filled with negativity and despair.
Once the weak hands have sold, a bottom has normally been found and then we have tended to go up again for three years. In each of those 3 year bull runs, there has been a block having and more people have joined the Bitcoin eco system. More people have learnt about Bitcoin, it becomes easier to buy Bitcoin with fiat money and more use cases are developed. Increased demand with a supply that is increasing at a slower rate tends to lead to higher prices.
Bitcoin's total possible supply being limited to 21m is one of the key arguments for its potential as a future reserve currency. Over time, a significant number of Bitcoins have been lost, estimated to be around 4 million out of the 19 million currently mined. While the speed at which people are losing their Bitcoin is hard to measure, it is possible that the total supply of Bitcoin is now decreasing.
On the demand side of things, people that have taken the time to learn about the use case for Bitcoin rarely go back. Their understanding is hard to unlearn and there is no real substitute for Bitcoin as a store of value. It is unique in the proof of work system that secures the ledger of every Bitcoin transaction that has ever happened. The history of transactions cannot be changed and that means that this is a form of money that cannot be taken away from you. Many alternative crypto currencies have now been created. Some of them do have some utility, but none of them have a proof of work system that is as decentralised or as immutable as the Bitcoin network. Therefore Bitcoin is the best cryptocurrency with a use case of being a long term store of value.
In most markets, a sound strategy is to buy when others are excessively pessimistic and sell when they are overly optimistic. This rule has held true in the Bitcoin market as well. However, those who exercise patience and possess an understanding of the regular Bitcoin cycle gain an additional advantage. As someone with over 21 years of trading experience, I have never seen another market with such a clockwork-like cycle.
It's worth noting that the relative impact of each block halving is diminishing with each cycle. The ratio of new coins being issued to the total coins already in circulation is decreasing. This is not necessarily a negative development, as it may lead to a smoother price cycle over the years. The volatility that often characterises Bitcoin's price is sometimes cited as a hindrance to its effectiveness as a currency.
By sharing this knowledge, I am aware that I am potentially reducing my own opportunity to profit from wide price swings in Bitcoin. However, if this information helps to reduce the dominance of greed and fear among Bitcoin investors, it may contribute to a smoother cycle and expedite the process of Bitcoin adoption.
It is worth noting that, while the historical pattern has been reliable in the past, it is a fact that no one knows the future for certain. Changes in demand dynamics, such as increased regulation or other factors, may impact the price of Bitcoin. This analysis is not financial advice but rather an exploration of past patterns and potential trends.