Bitcoin has historically followed a typical four-year cycle. Now, two years into the current cycle, investors are looking closely at market patterns and indicators for insights into what the next two years may hold. This article delves into the anatomy of Bitcoin’s four-year cycle, past market behavior, and future prospects.
4 Year Cycle
Bitcoin’s four-year cycle is influenced in part by scheduled halving events, which reduce the block reward miners receive by 50% every four years. This decrease reduces the supply of new Bitcoin entering the market, often creating supply demand pressures that can drive prices up.
This can be clearly seen by the Stock-to-Flow Model, which compares the current BTC in circulation to its inflation rate, and models the ‘fair value’ based on heavy assets such as Gold and Silver.
Currently, we are in the middle of this cycle, which means we are likely to enter a period of large gains as the normal one-year holding phase following the halving continues.
Looking Back to 2022
Over the past two years, Bitcoin has experienced a major crash amid a series of corporate speculations. November 2022 marked the decline of FTX, as rumors of theft caused a massive sell-off. The domino effect was brutal, as other crypto institutions, such as BlockFi, 3AC, Celsius, and Voyager Digital, also went under.
The price of Bitcoin dropped from around $20,000 to $15,000, reflecting a broader market panic and leaving investors worried about Bitcoin’s survival. However, in reality, Bitcoin has rallied again, rising fivefold from its 2022 low. Investors who have weathered the storm have been rewarded, and this rebound supports the argument that the cyclical nature of Bitcoin remains the same.
Same feeling
In addition to price patterns, investor sentiment also follows a predictable rhythm throughout each cycle. Analyzing Net Unrealized Profit and Loss (NUPL), a metric that shows unrealized gains and losses in the market, suggests that emotions such as excitement, fear, and reciprocity. Bitcoin investors often experience strong feelings of fear or despair during each bear market, then move back toward hope and excitement as prices rise and rise. Currently, we are once again entering the ‘Confidence’ phase following our early cycle flow and subsequent consolidation.
The Global Liquidity Cycle
Global money supply and cyclical liquidity, as measured by Global M2 YoY vs BTC, also follows a four-year cycle. For example, the M2 currency depreciated in 2015 and 2018, just as Bitcoin depreciated. In 2022, M2 reached a new low, matching the bottom of the Bitcoin bear market. Following these periods of recession, we are seeing increased liquidity in all major banks and governments everywhere, leading to better conditions for Bitcoin price appreciation.
Common Patterns
Historical price analysis suggests that Bitcoin’s current path is remarkably similar to previous cycles. Since its lows, Bitcoin usually takes about 24-26 months to break past highs. In the last cycle, it took 26 months; in this cycle, the price of Bitcoin is on the same upward path after 24 months. Bitcoin has historically peaked about 35 months after its low. If this pattern holds, we could see a significant price increase in October 2025, after which another bear market may begin.
Following the expected peak, history suggests that Bitcoin will enter a bear phase in 2026, lasting about one year until the next cycle starts again. These patterns are not guarantees but they provide the road that Bitcoin has stuck to in previous cycles. They provide a framework for potential investors to anticipate and adapt to the market.
The conclusion
Despite the challenges, Bitcoin’s four-year cycle has endured, largely because of its supply chain, global liquidity, and investor sentiment. Therefore, the four-year cycle remains an important tool for investors to interpret potential price movements in Bitcoin and our fundamental position throughout this cycle. However, relying on this cycle alone may be a misnomer. By combining on-chain metrics, liquidity analysis, and real-time investor sentiment, data-driven approaches can help investors respond effectively to changing conditions.
For more depth on this topic, check out the latest YouTube video here: The 4-Year Bitcoin Cycle – Half Way Done?
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