News & Analysis
News & Analysis

Bitcoin (BTC) Cycles.

16 May 2022 By Christian Ramos

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The Crypto market cap at the time of writing is sitting at $1.46 Trillion, down by just under 5% over the last day, according to CoinMarketCap data. Bitcoin (BTC) has been trading between $34,562 on Monday to a low of $26,258 USD today. That is a drop of 24.68% and it could potentially fall further, in what many are advising it is resembling a continuation of Bitcoin’s Cycles, where the asset could lose up to 85% of its value according to Richard Heart (Founder of HEX, PulseChain, PulseX and early Bitcoin adopter).

The cycles peaks as you can see below, are huge in terms of price action. One thing that usually comes after an all-time high run as it has recently, is the depreciation of the asset otherwise known as a correction. A correction is a decline of 10% or greater in the price of a security, asset, or a financial market. Corrections can last anywhere from days to months, or even longer. While damaging in the short term, a correction can be positive, adjusting overvalued asset prices and providing buying opportunities.

One of the most powerful of narratives to Bitcoin’s cycles is that of the halvings. Roughly every four years Bitcoin’s issuance rate is programmatically halved. A Bitcoin halving limits the supply of new coins. Mining is the process of verifying transactions and adding new blocks to the Bitcoin network. Experts are predicting that the remaining Bitcoins will be mined by 2140.

  • Bitcoin halving is when the reward for mining bitcoins is cut in half.
  • At the current rate that bitcoins are being produced, halvings happen about every four years.
  • Bitcoin halving is part of a system designed to cap the total number of bitcoins at 21 million.

The halvings happen without any regard to ongoing demand, meaning that if the ongoing demand remains the same after a halving event, whatever demand was being met by new supply will be restricted, necessitating an upwards adjustment of price.

The halving-driven cyclicality thesis claims that these price increases cause Bitcoin to garner further attention, capturing additional investment as the population becomes increasingly informed about bitcoin, its properties and potential. So, from the halving price increases, new demand is brought forward and the foundations of a new bull market is laid down.

In short, Bitcoin’s a young asset, it has built momentum over the years and within each cycle, it tends to recruit more investors as these investors are buoyed by the upward projection and adoption from institutions. While it remains anyone’s best guess whether bitcoin will keep following the exact same patterns and trends established by previous price cycles, unlocking new levels of demand as it goes, investors can at least feel reasonably assured that human psychology will remain unchanged, and that Bitcoin will continue cutting its issuance rate in half every four years until it reaches its 21 million supply limit.

As a GO Market trader, you will have access to BTCUSD pair, along with other major cryptocurrencies on our MetaTrader systems. To register for an account please visit us here https://www.gomarkets.com/au/. If you would like to discuss differences in MT4 and MT5 systems along with the different account types we offer please email me christianr@gomarkets.com or call our Melbourne office on 03 8566 7680.

Sources: Flowbank.com, CoinMarketCap, www.businessinsider.com, CoinMetrics by Clark Moody.

Disclaimer: Articles are from GO Markets analysts and contributors and are based on their independent analysis or personal experiences. Views, opinions or trading styles expressed are their own, and should not be taken as either representative of or shared by GO Markets. Advice, if any, is of a ‘general’ nature and not based on your personal objectives, financial situation or needs. Consider how appropriate the advice, if any, is to your objectives, financial situation and needs, before acting on the advice. If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

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