BitMEX co-founder Arthur Hayes agreed that the four-year cryptocurrency cycle is over, but not for the reason many believe.
“As the fourth anniversary of the fourth cycle approaches, traders are looking to apply historical patterns to predict the end of this bull market,” Hayes said in a blog post Thursday.
He added that while the four-year pattern has worked in the past, it cannot be applied now and “this time it will fail.”
Hayes argued that the Bitcoin (BTC) price cycle is primarily driven by the supply and volume of currencies such as the US dollar and Chinese yuan, rather than an arbitrary four-year pattern related to halving events or a direct result of institutional interest in cryptocurrencies.
Hayes said past cycles ended when financial conditions tightened, not because of timing.
The current cycle is different
Hayes argues that the cycles are different for several reasons, including that the U.S. Treasury is releasing $2.5 trillion from the Fed’s reverse repurchase program by issuing more Treasury bills, and that President Trump wants to “go all in” with easy monetary policy to get out of debt.
Deregulation is also planned to increase bank lending.
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Additionally, the US central bank has resumed lowering interest rates even though inflation remains above target. According to the CME futures market, two more rate cuts are expected this year, with a 94% chance of an October cut and an 80% chance of a December cut.
It’s all about China and US money printing
Bitcoin’s initial bull run coincided with the Federal Reserve’s quantitative easing and China’s credit expansion, and ended in late 2013 when both the Federal Reserve and China’s central bank slowed money printing.
The second “ICO cycle” was primarily driven by the 2015 credit explosion and devaluation of the Renminbi, rather than the US dollar. He said the bull market has broken down as China’s credit growth has slowed and dollar conditions have tightened.
In the third “(COVID-19) cycle,” Bitcoin soared solely on US dollar liquidity while China remained relatively subdued. Hayes explained that it ended when the Fed began tightening at the end of 2021.
China will not destroy the cycle this time
Hayes argued that while China will not accelerate this rise as much as in previous cycles, policymakers are moving to “end deflation” rather than continue to drain liquidity.
This shift from deflationary headwinds to at least neutral or mildly supportive monetary policy removes a major obstacle that would have killed the cycle, allowing US financial expansion to drive Bitcoin higher without Chinese deflation canceling it out, he said.
“Listen to the currency masters in Washington and Beijing. They have clearly stated that money will become cheaper and more abundant. So Bitcoin continues to rise in anticipation of this likely future. The King is dead, long live the King!”
Many people still believe in the 4-year cycle
On-chain analytics firm Glassnode said in August that “from a cyclical perspective, Bitcoin price trends also reflect previous patterns.”
“When it comes to four-year cycles, the reality is that some form of the cycle is very likely to continue,” Saad Ahmed, regional head of APAC at crypto exchange Gemini, told Cointelegraph earlier this month.
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