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Bitcoin has essentially represented the public “face” of cryptocurrencies since its inception back in 2009.

While there are plenty of other tokens out there, the general public (and indeed many investors) will often interpret the overall state of the market by closely following the price of BTC. This is why understanding Bitcoin cycles is extremely important.

However, there are many other concepts that we need to appreciate in order to wrap our heads around the long-term cyclical nature of BTC values. How long does each cycle normally take?

What does “halving” have to do with the price of Bitcoin? Do these cycles affect other tokens? How can traders take advantage of such price movements? These are some of the topics that we’ll discuss.

Bitcoin Cycles: The Basics

Let’s begin by remembering that while Bitcoin is a unique form of decentralized currency, it’s still governed by two fundamental economic principles: supply and demand. Much like other tradable assets such as gold, blue-chip stocks and government bonds, a decrease in supply generally leads to higher demand and increasing prices. On the other hand, less demand causes an oversupply and a decrease in value. How does this principle apply to Bitcoin cycles?

Bitcoin cycles are said to occur once every four years. Each of these cycles can be broken down into four discrete phases. It’s a good idea to take a closer look at each phase before descending any deeper into the rabbit hole.

  1. The Accumulation Phase: The first portion of any Bitcoin cycle involves traders who purchase tokens at a low price and hold on to them in the anticipation of an upcoming bull run In other words, they’re primarily concerned with buying low and selling high.
  2. The Mark-Up Phase: As more BTC tokens are accumulated, their price begins to rise substantially. This is known as the mark-up phase. The increase in value will ultimately be determined by the level of demand (that word once again) from institutional investors and individual traders. Most analysts agree that this phase generally represents the “peak” of any given four-year Bitcoin cycle.
  3. The Distribution Phase: The best way to describe this next stage is “walking away at the right time”. Investors who purchased BTC during the accumulation and mark-up phases will generally have realized a substantial profit, so it’s now time to sell. This leads to an increased supply of Bitcoin on the market and less demand. So, the price therefore drops. Let’s note that some may call such a movement a re-correction.
  4. 4. The Mark-Down Phase: Finally, the cryptocurrency ecosystem will need to re-adjust for the downward trend described in the previous section. This can result in a sudden and steep decline in BTC prices. As there aren’t many buyers during this phase, the marketplace can become stagnant; resulting in few noticeable movements. The mark-down period may last for months at a time until it once again balances the dynamics of supply and demand.
Rating: 9.5/10
Supply: 18,925,000 / 21,000,000
Release date: January 3, 2009

Description: Buy BTC and be part of the cryptocurrency revolution.

Risk warning: Trading, buying or selling crypto currencies is extremely risky and not for everyone. Do not risk money that you could not afford to loose.

What’s the Deal with Bitcoin “Halving”?

We now need to look at the other main variable that influences Bitcoin cycles. This is known as “halving“. So, what exactly is halving?

Bitcoin runs on a decentralized network and digital “ledgers” are used to track transactions. When systems process these transactions, new tokens are created. This is commonly referred to as Bitcoin mining. In theory, the supply of Bitcoin would continually increase in direct relation to how many new tokens are generated through the process of mining.

This will obviously present an issue in terms of an oversupply and therefore, a massive decrease in value. So, the overlords at BTC have created halving as a means to avoid such a scenario.

Halving events are used to cut Bitcoin mining rewards by 50 percent (you guessed it). These occur once every 210,000 blocks. Blocks are simply a set of BTC transactions that have taken place over a specific period of time. It just so happens that each halving event will occur (approximately) once every four years. History proves this correct. Previous halving was performed in 2009, 2012, 2016, and 2020.

You’re likely asking an important question. When will the next halving event occur? The good news is that guessing won’t enter into the equation. BTC will once again be halved on 26 April 2024. If you prefer the answer in terms of blocks, this equates to the instant that block 840,000 is created.

What Can We Expect Immediately After Halving?

Now that we understand how halving is related to four-year Bitcoin cycles, it’s perfectly logical to conclude that the period between now and April 2024 isn’t likely to see any sudden price movements. However, we’re also assuming that no external variables come into play. Some of these could include:

  • Governmental intervention within the crypto ecosystem (as may be on the horizon)
  • Surprising economic data emerging from a specific country or region
  • Interest rate hikes be central banks
  • Inflation.

Barring these and similar examples, many investors will likely remain seated on the proverbial fence; appreciating that we are currently in the mark-down phase and demand is lacking. Others could also be holding on to their assets under the assumption that the price of Bitcoin will immediately skyrocket after halving is completed.

How Bitcoin Cycles Affect Other Cryptocurrencies

Up until this point, we’ve been referring to Bitcoin cycles as closed systems. This made it easier to appreciate the fundamentals and to describe how and why these events take place within a predictable timeline. However, do BTC cycles impact the values of other crypto tokens? It’s now a good idea to take a look at a concept known as crypto correlation.

Crypto correlation is another way to describe how the movement of one token may affect another. From a general point of view, cryptocurrencies tend to be positively correlated. Simpy stated, they are interlinked in terms of real value. This is actually not dissimilar to other tradable assets such as precious metals. When the price of gold rises, others including silver, copper and palladium tend to follow suit.

Why are Bitcoin cycles prone to influence other cryptocurrencies such as Ethereum (ETH), Litecoin (LTE) and Dogecoin (DOGE)? One takeaway point is that investors tend to look to BTC to determine the condition of the markets as a whole. So, promising Bitcoin price movements often indicate positive trading sentiment and therefore, a signal that it’s time to buy. This is why some have referred to BTC as the “barometer” of the crypto ecosystem.

Are Any Assets Unaffected by Bitcoin Price Movements?

Some astute readers might now be asking yet another relevant question. Are there any tokens that can be used as hedges against Bitcoin cycles (and movements in general)? In other words, which (if any) tokens display zero correlation with BTC?

You might be surprised to learn that out of more than 5,000 cryptocurrencies, only a handful have the ability to remain entirely independent of general market sentiment. These are (at he present):

  • Link
  • Atom
  • Tesos (XTZ)

What makes these assets so special? While there is still an ongoing debate, the most likely reason involves their relatively low exposure when compared to assets associated with larger and much more recognizable blockchains.

Think of this relationship as the difference between holding stocks in a multinational corporation that is exposed to numerous market risks and purchasing a small-cap IPO that happens to be involved in a niche sector.

What Will be the End Result of the Next Halving Event?

We’ll address one final question. Now that we know when the next halving is going to take place as well as when the latest four-year cycle will complete, how will the price of BTC be affected?

Most industry experts seem to have adopted a rather upbeat long-term outlook. The fact of the matter is that Bitcoin has become extremely popular since the previous 2016-2020 cycle. Furthermore, even casual day traders understand the associated mechanics. These two variables point to a considerable influx of active traders coming on board during the first phase (accumulation) of the new cycle. With supply cut and a burgeoning demand, there’s little doubt that BTC values will once again enter into bullish territory.

Still, many things can happen between now and then. One concern that remains in the backs of the minds of many traders involves the possibility of future market regulations by the United States Security and Exchange Commission (SEC). Should this occur, many US-based investment platforms may choose to relocate their offices abroad. Such an event could have a profound impact upon the price of BTC and countless other crypto tokens.

Either way, the team at Crypto Lists will continue to keep readers up to date with all of the latest BTC news and price predictions. This is the best way to “ride the wave” of Bitcoin’s four-year cycles.

by Our Certified Author
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