Arthur Hayes, co-founder of BitMEX, has acknowledged that the four-year crypto cycle is over, but not for reasons many might assume.
“As we approach the four-year mark of this current cycle, traders are eager to apply historical trends to predict the end of this bull market,” Hayes stated in a blog post on Thursday.
He noted that although the four-year trend has worked in the past, it is now outdated and “will not hold this time.”
According to Hayes, Bitcoin (BTC) price cycles are influenced more by the supply and circulation of money, particularly USD and the Chinese yuan, than by arbitrary four-year intervals linked to halving events or the direct involvement of institutional investors in crypto.
He asserted that past cycles concluded due to tightening monetary conditions, not merely timing.
The current cycle is distinct
Hayes stated that this cycle differs for multiple reasons, such as the US Treasury withdrawing $2.5 trillion from the Fed’s Reverse Repo program into the markets by issuing additional Treasury bills, along with President Trump’s desire to maintain a “hot” economy through looser monetary policy to manage debt.
There are also initiatives to deregulate banks to enhance lending opportunities.
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Moreover, the US central bank has resumed interest rate cuts, even with inflation exceeding its target. Predictions indicate two more rate cuts this year, with a 94% chance of one in October and an 80% likelihood of another in December, according to CME futures markets.
It’s all about US and Chinese monetary expansion
Bitcoin’s initial bull run aligned with Federal Reserve quantitative easing and Chinese credit growth, concluding when both the Fed and Chinese central bank reduced money printing in late 2013.
The second “ICO cycle” was mainly driven by the credit boom and currency depreciation in China in 2015, rather than USD. The bull market faltered when Chinese credit growth slowed and dollar conditions tightened, he explained.
During the third “[COVID-19] cycle,” Bitcoin’s rise was primarily fueled by USD liquidity while China remained relatively restrained. It ended when the Fed began tightening in late 2021, Hayes clarified.
China won’t hinder the cycle this time
Hayes contended that while China may not drive this rally as significantly as before, policymakers are now aiming to “end deflation” instead of continuing to withdraw liquidity.
This transition from a deflationary challenge to at least neutral, or mildly supportive monetary policies alleviates a significant barrier that could have derailed the cycle, permitting US monetary expansion to push Bitcoin higher without counteracting Chinese deflation, he noted.
“Listen to our monetary authorities in Washington and Beijing. They clearly indicate that money will be cheaper and more abundant. Thus, Bitcoin is set to rise in anticipation of this likely future. The king is dead, long live the king!”
Many still have faith in the four-year cycle
On-chain analytics firm Glassnode reported in August that “from a cyclical standpoint, Bitcoin’s price movements reflect previous patterns.”
“Regarding the four-year cycle, the reality is that it’s highly probable we will witness some form of a cycle,” Saad Ahmed, head of APAC region for the crypto exchange Gemini, told Cointelegraph earlier this month.
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