The cryptocurrency world is beginning to make the transition to a second era. Bitcoin is breaking out of its four-year cycle and appears to be entering a so-called ‘super cycle’. Bitcoin’s price has historically risen and fallen according to the cycle of ‘halvings’, when every four years the flow of new coins into the Bitcoin network is cut in half. Over the past month, however, the price rose from $20,000 to nearly $30,000, and not because of halving expectations, but because of hopes that ETFs might finally be approved. This is a major change in Bitcoin’s behaviour because, with each knock to its safe-haven status, it’s much less volatile and behaves more like other financial markets.
Just add the fact that Metcalfe’s law – which posits that the value of a network increases exponentially with every user added to the user base – suggests the value of Bitcoin gets stronger every time it is adopted by someone else. Bitcoin started this last cycle around $3,000, when the first institutional exposure to crypto occurred in late 2017. Ten years ago, bitcoin’s market never went above 30 cents and its price was established by a few coin-exchanges that got together and set a price that they felt made sense. Add in the fact that we now have technological benchmarks and institutional exposure to this asset, and Bitcoin’s trajectory suggests the next peak might emerge at a whole new level, similar to how gold transformed from a commodity to a market-priced asset in the 1970s, after the Bretton Woods agreements failed. It was seen as a spuriously priced asset in the 1960s, until it was acknowledged that it could exist as an asset on a market, and that’s when it became a reliable store of value.
Despite the fact that it is too early to say for certain, it is important to note that the current state of events and the growing evidence of patterns indicates that we might be witnessing the end of Bitcoin’s four-year cycle and ushering in a new stage of Bitcoin’s development. Investors and market observers should stay alert to the recent changes in order to bring about a dynamic and perhaps more stable evolution in the cryptocurrency market.
Source: Forbes
