A Stanford MBA has explained why the current Bitcoin cycle was different from the others, and why the next one could end up being bigger.
This Bitcoin Cycle Faced Obstacles That May Not Be There Next Time
A “cycle” for Bitcoin refers to the period between two consecutive halvings. The halvings, events where the rewards miners receive for solving blocks on the network are permanently slashed in half, are chosen as the start and end points for the cycles due to the immense significance they hold for the cryptocurrency.
The rewards miners earn are essentially the only way new supply can be introduced into circulation, so since halvings cut these in half, the production rate of the asset itself gets tightened.
Because of basic supply-demand dynamics, Bitcoin’s post-halving scarcity increases the asset’s valuation. It’s not a coincidence that the bull markets have always followed these special events.
The halvings occur roughly every four years, with the next one being scheduled for next year. As BTC transitions towards a new cycle, Jesse Myers, a Stanford MBA, has released a new post that looks back at this cycle so far and compares it with the previous cycles.
At first sight, one difference becomes immediately clear: the structure of the top during this past bull market wasn’t anything like what the previous cycles displayed.
How the previous halving cycles looked like at the current stage | Source: Once-In-A-Species
“Instead of a parabolic advance culminating in a blow-off top, we got a bi-modal rounded top spread out over six months,” notes Myers. So, why did the BTC price behave differently during this bull market?
Well, there are mainly four factors at play here. The first and undoubtedly the biggest one would be COVID-19 and the US government’s response to it. The onset of the virus and the black swan crash that came with it just preceded the cycle, meaning that the cycle kicked off in anomalous conditions.
During the cycle itself, the Fed was giving out stimulus checks as a way to mitigate the economic impacts of COVID. “That Quantitative Easing (QE) undoubtedly helped fuel the 2021 Bitcoin bull market,” explains the Stanford MBA.
The problem came, however, when the Fed changed its policy and switched to Quantitative Tightening (QT). Interestingly, this switch appears to be what marked the Bitcoin top in November 2021.
In the middle of all this, another factor was also at play: the May 2021 China ban on Bitcoin mining. Back…
Click Here to Read the Full Original Article at NewsBTC…
