Why Bitcoin’s Price Isn’t Ruled by the Four-Year Cycle

Bitcoin’s Mythical Four-Year Cycle

Since its inception, Bitcoin has been shrouded in the belief of a deterministic four-year cycle, driven by the halving of block rewards. However, Arthur Hayes, co-founder of BitMEX, challenges this notion, suggesting that the cycle is more an illusion than fact. According to Hayes, it’s the expansive and contractive nature of global monetary policies, particularly those of the U.S. and China, that truly crown Bitcoin as a monetary sovereign.

The Enduring Scarcity of Currency

Hayes argues that the world remains deeply entrenched in a scarcity-driven society, one where currency is essential for distributing limited resources. He explains that inflation, wealth inequality, and political instability are often the products of governments manipulating interest rates and monetary supply. Both capitalist and communist systems, according to Hayes, have their methods and consequences of monetary intervention.

Inflation’s Role and the Print Money Paradox

Faced with the pressures of inflation bred by capitalist economies and free markets, governments inevitably find themselves resorting to printing more money. This endless cycle of inflation is met by individuals with cultural practices and savings traditions as forms of resistance, especially in regions with strong monetary traditions such as the gifting in Asian ceremonies.

Bitcoin: A Revolution Against Monetary Tyranny

In a global economy where individuals are often coerced into using specific currencies by governments, Bitcoin emerges as a revolutionary technology. Satoshi Nakamoto’s creation, argues Hayes, represents a monumental advance in monetary technology, allowing people to hold and transfer value without reliance on national frameworks. He posits that Bitcoin’s value cycles are more about global liquidity shifts, governed by the credit cycles of the dollar and renminbi.

The Unveiling of Four Major Liquidity Cycles

Tracing Bitcoin’s journey through four historical liquidity cycles, Hayes connects the cryptocurrency’s booms and busts not to its internal mechanisms but to the broader economic policies of major powers.

• Genesis Cycle (2009–2013): Following the global financial crisis, both the Federal Reserve’s QE initiatives and China’s credit expansions fueled Bitcoin’s first surge, setting the stage for its inevitable crash when both nations tightened financial reins.
• ICO Cycle (2013–2017): Ethereum’s rise ignited an ICO boom, while China’s aggressive credit expansions led to renminbi devaluation and Bitcoin appreciation. The cycle ended with simultaneous monetary tightening by the U.S. and China.
• COVID Cycle (2017–2021): Pandemic measures in the U.S., including generous fiscal policies, propelled a sweeping cryptocurrency bull market that only ended when inflation prompted interest rate hikes.
• New World Order (2021-?): The liquidity surge from U.S. fiscal actions continues to define the current cycle, hinting at a forthcoming extended bull market for Bitcoin.

Death to the Old, Long Live the Bitcoin King

Hayes concludes with a vivid metaphor: the declared end of the old monetary regime heralds the coronation of Bitcoin as the new king. He underscores that listening to the monetary strategies unfolding from Washington and Beijing is pivotal, as both are united in the language of abundant, affordable money. In this context, Bitcoin stands poised once again to ascend the throne as the dominant currency in an ever-evolving financial landscape.