Bitcoin New Market Cycle might be different this time

This time is different: COVID, Gold 2.0 narrative, institutional herd, and ease of use have set a new stage. Instead of a normal bull/bear cycle, Bitcoin could break convention and enter a “Supercycle”

You probably first heard of Bitcoin in 2013 or 2017 when friends and family were talking about the wild swings in price. Bitcoin’s market cycle is typically around 4 years and some hypothesize the cycle is induced by halvings (a reduction in new supply). The idea being a reduction in supply + increase in demand = number go up. We can call this Bitcoin’s viral marketing loop.

Satoshi describes it succinctly: “As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.” Satoshi wrote this before Bitcoin was even worth $0.01. In the chart below, we have Bitcoin’s price, and halvings which are the dotted lines. As we can see, a bull run has occurred after each halving.

Logarithmic Chart of Bitcoin since 2011. Dotted lines show the date of the halvingss:

This Cycle is Different

However, this cycle is different. Never before has Bitcoin had such strong fundamentals against a macro backdrop that highlights exactly why Bitcoin is needed, the narrative is singular, and the ability for global value to flow into Bitcoin has never been easier. While Bitcoin was planted during the 2008 financial crisis, it has blossomed largely during a macro bull run. From 2008–2020, the traditional financial markets had a few minor corrections but no recession. Until COVID came. When COVID came, the markets plunged. This was Bitcoin’s first real test. Will HODLers (Hodl is slang in the cryptocurrency community for holding the cryptocurrency rather than selling it) be the buyer of last resort? Will Bitcoin go to $0 when the world is on fire? While Bitcoin suffered a nail bitting plunge during the March 12th liquidity crisis (which affected all assets), Bitcoin survived and surged out of the gates in late 2020 to reach all time highs of $24k.

Main drivers of this Cycle:

1. Bitcoin Unique Value Proposition : Bitcoin offers a unique store of value that is objectively better than gold, with higher upside potential. And from a portfolio construction perspective, Bitcoin is an uncorrelated asset which improves a portfolio’s return per unit of risk.
2. Unprecedented Quantitative Easing: While Bitcoin recovered, governments across the world engaged in unprecedented money printing. And when I say unprecedented, I mean never before in all recorded financial history. $10T+ was printed across the world to bolster the traditional finance system. This meant that governments were actively devaluing their currency, which is exactly what Bitcoin was built to protect against.
3. New Inflows of Institutional Capital: COVID brought Bitcoin’s value into focus for the world. And because of that, a new market participant started to buy Bitcoin: the institutions. The institutional herd is here. When COVID roiled the markets, institutions were searching for safe stores of value. Bitcoin offers a unique store of value that is objectively better than gold, with higher upside potential. And from a portfolio construction perspective, Bitcoin is an uncorrelated asset which improves a portfolio’s return per unit of risk. Institutions manage over $100T. Here are the financial institutions and trading legends that have recognized Bitcoin is Gold 2.0 over the last 4 months:
   Fidelity — JP Morgan — Bloomberg — Deutsche Bank — Citibank — Jefferies — Blackrock — Guggenheim — AllianceBernstein — Bill Miller — Mass Mutual.

4. Accessibility to Bitcoin and Easy of Use: In 2017 there was very little content to help newcomers understand Bitcoin, and for existing Bitcoiners to maintain the faith. After the 2017 bull run, there was an exponential wave of great content that enabled a higher conversion rate of nocoiners to Bitcoiners. In the 2013 and 2017 Bitcoin bull runs, it was relatively hard to buy Bitcoin. Often you had to send a wire and understand how an order book worked. Now you can buy Bitcoin with PayPal, or your traditional brokerage like Robinhood.

Conclusion

Bitcoin was made for this moment. It is easier to understand and purchase from a wide variety of places. What happens when ownership of Bitcoin moves from 0.01% of the world to 1%? What happens when part of the $100T funds currently under management by institutions starts flowing heavily into Bitcoin to preserve wealth? It certainly won’t be going from $20k to $100k. It could move from $20k to $1M and then only have smaller cycles after. This may be one of the final big cycles.