In a recent article, experts discussed whether Bitcoin's historical four-year cycles are continuing. Key factors in this discussion included ETF demand, market psychology, and corporate Bitcoin accumulation strategies.
Nature of Bitcoin Cycles
According to expert Rational Root, the Bitcoin market has not yet approached the end of a cycle based on current data. Root notes that the current price level is approximately 0.25 standard deviations above the short-term cost base. In the previous cycle, these values reached up to four standard deviations, which suggests that the market remains on an upward trend. Root believes this cycle shows a more regular and steady increase compared to past cycles, likely due to the influence of institutional investors.
Impact of Bitcoin ETFs
Among the significant market changes is the new demand for Bitcoin via ETFs, which is reportedly three and a half times the daily new Bitcoin production. Additionally, the amount of Bitcoin added to corporate treasuries has increased significantly. However, despite this new demand structure, Rational Root asserts that market psychology remains a defining factor. Investors continue to speculate whether cycles will lengthen or shorten in each cycle, while historical data shows substantial similarities.
Forecasting Future Cycles
By analyzing the renowned Spiral Chart data for Bitcoin, Root suggests that the market may be approaching an 'excitement and enthusiasm' phase. Although historical data indicates this period typically precedes market peaks, Root adopts the view that institutional interest could prolong the cycle. However, it remains unclear whether increased institutional participation will cause notable changes in cycles.
The dynamics of the Bitcoin market have shifted with institutional and corporate demand; however, the fundamental cycle structure and underlying human psychology remain largely intact. Investors can evaluate their decisions by monitoring the new demand structure and supply dynamics while drawing on historical data and emotional cycles.
