Arthur Hayes, co-founder of BitMEX, acknowledges the demise of the four-year crypto cycle, but he believes it’s for reasons that differ from common perceptions.
“As we approach the four-year anniversary of this fourth cycle, traders are eager to apply historical trends and predict the conclusion of this bull run,” Hayes expressed in a blog post on Thursday.
He noted that although the four-year pattern has worked in the past, it is now obsolete and “will not hold true this time.”
According to Hayes, Bitcoin (BTC) price cycles are influenced by the supply and amount of money, primarily USD and the Chinese yuan, rather than arbitrary four-year cycles associated with halving events or direct institutional interest in crypto.
He emphasized that previous cycles came to an end due to tighter monetary conditions, rather than following a specific timeline.
The current cycle is different
Hayes believes this cycle is distinct for various reasons, including the US Treasury draining $2.5 trillion from the Fed’s Reverse Repo program into the markets through the issuance of additional Treasury bills, alongside President Trump’s intention to adopt a “run it hot” policy to alleviate debt.
Moreover, there are plans to deregulate banking to encourage lending.
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Furthermore, the US central bank has resumed cutting rates despite inflation exceeding targets. Predictions indicate two more rate cuts this year, with a 94% chance of an October cut and an 80% likelihood of another in December, according to CME futures markets.
It’s all about Chinese and US money printing
Bitcoin’s initial bull run aligned with Federal Reserve quantitative easing and expansion of credit in China, concluding when both the Fed and the Chinese central bank reduced money printing in late 2013.
The second “ICO cycle” was largely driven by a surge in yuan credit and currency devaluation in 2015, rather than USD. This bull market collapsed as Chinese credit growth slowed and dollar conditions tightened, he stated.
During the third “[COVID-19] cycle,” Bitcoin’s rise was fueled solely by USD liquidity, while China remained relatively cautious, ending with the Fed’s tightening in late 2021, Hayes detailed.
China won’t kill the cycle this time
Hayes suggests that while China may not invigorate this rally as in previous cycles, policymakers are now focused on “ending deflation” instead of continually withdrawing liquidity.
This transition from a deflationary environment to at least neutral or mildly supportive monetary policy removes a significant barrier that could have undermined the cycle, allowing US monetary expansion to propel Bitcoin higher without the counteracting force of Chinese deflation.
“Listen to our monetary authorities in Washington and Beijing. They clearly affirm that money will become cheaper and more abundant. Thus, Bitcoin is poised to rise in expectation of this highly probable scenario. The king is dead, long live the king!”
Many still believe in the four-year cycle
On-chain analytics firm Glassnode remarked in August that “from a cyclical standpoint, Bitcoin’s price movements still reflect prior trends.”
“Regarding the four-year cycle, the likelihood is high that we will continue to observe some form of a cycle,” stated Saad Ahmed, head of the APAC region for crypto exchange Gemini, in an interview with Cointelegraph earlier this month.
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