So far in Bitcoin's short history, the digital asset has moved in different four-year 'Halving' cycles. If history is any guide, we are currently in the depression or distrust stage. Due to global tensions and macroeconomic challenges, there are question marks about the timing. However, if you are a long-term investor, volatility is to be expected.

Bitcoin Halving

The Bitcoin Halving Event is an important and highly anticipated event in the cryptocurrency world. It occurs approximately every four years and marks a pivotal point in Bitcoin's monetary policy. The event is embedded in the protocol and is designed to reduce the rate at which new Bitcoins are created, making them increasingly rare and valuable over time.

Halving events occur after every 210,000 blocks have been mined, about once every four years, because that's how the Bitcoin network operates.

To understand how important this is, let's take a look at what happened during previous Halving events in 2012, 2016, and 2020:

• Halving 2012: This was the first Bitcoin Halving event, taking place about four years after Bitcoin's creation.
• Halving 2016: At this time, Bitcoin started to gain greater recognition, and the media covered the event more extensively. Like the 2012 Halving, Bitcoin's price started to increase after this event, and it became clear that Bitcoin was entering a new phase in its market cycle.
• Halving 2020: The most recent Halving occurred in 2020. The price of Bitcoin experienced significant growth, attracting the attention of more people. This event coincided with the global liquidity injection caused by Covid.

The takeaway from these previous Halving events is that they often signal the start of a bullish phase for Bitcoin. A decrease in the rate of creation of new Bitcoin highlights its scarcity, making it more attractive to investors as a store of value asset. This scarcity narrative, combined with increased adoption and recognition, tends to boost demand and, as a result, the price of Bitcoin.


While past performance does not guarantee future results, this historical pattern has led many members of the crypto community to believe that Bitcoin Halving events are crucial in shaping its market cycle. Therefore, every Halving event is always filled with interest and speculation about its potential impact on Bitcoin price and the cryptocurrency market as a whole.

Conversely, some believe that the quadrennial cycle is aligned with the global liquidity cycle, which is a more significant determinant in Bitcoin's price performance.

Typical Stages in the 4-Year Cycle

Another way to look at the four-year cycle is through the lens of four stages:

1. Rapid Price Increase: In every Bitcoin market cycle, there is a period of rapid price increase, often referred to as a bull run. During this phase, the price of Bitcoin soars to new highs, attracting huge attention from investors and the media. Peaks and
2. Corrections: At some point during the bull run, Bitcoin reaches the peak price for the cycle. Usually, this peak is followed by a significant correction, during which the Bitcoin price drops from the high. This correction phase can be triggered by profit-taking, regulatory news, or other factors.
3. New Support Levels: New support levels are formed during the correction phase of each cycle. When Bitcoin undergoes a correction, the price does not drop as low as at the previous cycle's low.
4. Continued Growth: After a long period of horizontal movement, the price begins to trend upwards. This trend is sustainable at this stage of the cycle.

Source: @seth_fin

Bitcoin Cycle Based on Psychology

The ten sentiment or psychological stages are recurring patterns that make up the market cycle. It is important to note that not every market cycle will exactly fit this chart, and timing can be different.

However, these stages provide valuable insight into the psychological aspects of market cycles. These stages are common in all markets, including crypto markets. However, their duration and intensity can be affected by factors such as risk (especially high in cryptocurrency markets). It is important to recognise that accurately predicting market cycles is a difficult endeavour.

From this we can conclude that markets exhibit a cyclic nature; they do not experience continuous upward momentum or fall to absolute zero (assuming they maintain long-term legitimacy). Historically, they tend to "revert to the mean" over time.

Where Do We Stand on Sentiment Now?

It's a good idea to separate Bitcoin and altcoins, as they have very different sentiments.

Bitcoin: The best guess is that Bitcoin is in the mid to late stages of the distrust stage.

The price has risen significantly from a low of around $15,000, and its performance shows a similar trend ahead of the Halving. There is still a lot of negative sentiment in the crypto market and traditional finance. There are arguments stating that this time is different as US liquidity is drying up, a war or threat of war is brewing in several places, the global economy is underperforming, and China's deflation may cause them to repeat Japan's mistakes.

Despite these risks and the recent appreciation of the DXY, Bitcoin has held up remarkably well.

Altcoins: In contrast, altcoins are still in the depression stage. Although some coins have performed quite well during the bear market, overall it can be said that non-Bitcoins have not fully recovered from the bottom.

Ethereum is an anomaly that could arguably be in the distrust or depression stage. Ethereum has performed below Bitcoin but surpassed most Altcoins.

Source: @thescalpingpro

What Does It All Mean?

The number of Bitcoin holders is simply incredible compared to previous cycles. More and more people are understanding the value proposition of the orange-coloured asset. Other established blockchain projects are also starting to show their capabilities. This is very different from previous cycles, where hysteria was based on hopes and dreams.

With the most divergent macroeconomic picture since Bitcoin's inception and the black swan risks associated with war, this cycle will be different from the previous ones. However, the extent of that difference will not be as great as some commentators claim. Deflationary assets mixed with technological advancements will continue to drive the importance of blockchain.

If we really are in a distrust stage for Bitcoin and a depression stage for Altcoins, then this will be one of the last opportunities to DCA harder into your positions before prices pull away. Yes, there is a risk of a black swan event.

Yes, smart people are telling us that things should collapse.

And yes, the threat of war can cause inflationary pressures. However, the important thing is to broaden the perspective. If you're confident, it's better to be in the game than sitting on the sidelines. Don't get caught waiting for lower prices that may never come. If you are worried about downside risks, buy some put options.

Summary

Bitcoin and crypto go through cycles. Whether following global liquidity or the four-yearly Bitcoin Halving cycle, the value proposition continues to increase as adoption and awareness increases. We're at the end of a bear market cycle, so it might be time to do some research on projects you're interested in and at least start paying in instalments.

Disclaimer on : Not investment advice/advice, do further independent research into investment decisions.