Original Title: From Retail Frenzy to Institutional Dominance, Is Bitcoin's Four-Year Bull Market Cycle Coming to an End?
There has been a lot of discussion around Bitcoin's four-year bull and bear cycle. This pattern of exponential rises, sudden crashes, and then climbing to new highs has characterized most of Bitcoin's history. However, it must be pointed out that there are ample reasons to suggest that this four-year cycle may be coming to an end.
We need to first raise a question: why does a four-year cycle occur?
It can be summarized into three factors:
Halving Effect
Every time the number of blocks increases by 210,000 (approximately four years), the Bitcoin mining reward is halved. This mechanism typically causes a price increase in the following years by creating a supply shortage.
Asset scarcity is often measured by the stock-to-flow ratio (S2F), which is the ratio of the existing total supply to the annual new supply. Taking the scarce asset gold as an example, its S2F ratio is 60 (which can fluctuate slightly due to new gold mine discoveries). The current Bitcoin S2F ratio is approximately 120, meaning its annual new supply is only about half that of gold. This number will increase with each halving thereafter.
Global Liquidity Cycle
The correlation between Bitcoin and global M2 liquidity has been explained multiple times by us and various institutions. It is noteworthy that many believe liquidity also follows a cyclical pattern of about four years. Although its accuracy is not as high as the metronome-like precision of Bitcoin halving, this correlation does exist. If this theory holds, the phenomenon of Bitcoin moving in sync with it would have reasonable logic.
Psychological perspective
Whenever a wave of frenzied bull market appears, it gives rise to a new round of popularization. People's behavior patterns confirm Gandhi's assertion: first they ignore you, then they laugh at you, then they fight you, and finally you win. This cycle repeats itself, and approximately every four years, people further accept the value of Bitcoin, endowing it with stronger legitimacy. People always fall into excessive excitement, and the subsequent crash sends the entire cycle back into motion.
The question now is, are these factors still dominating the price of Bitcoin?
Halving Effect
After each halving, the trend of the newly added Bitcoin quantity accounting for the total supply decreases increasingly weak. When the newly added supply accounted for 25% of the total supply, the drop to 12.5% had a significant impact; however, now the decrease from about 0.8% to 0.4% has a much lesser actual impact.
Global Liquidity Cycle
Global liquidity remains a relevant factor for Bitcoin prices, although this influence is undergoing a transformation. Bitcoin is shifting from a retail-driven market to an institution-driven one, altering trading behavior. Institutions are engaging in long-term accumulation, and short to medium-term price declines will not shake them out of the market. Therefore, while global liquidity will still affect Bitcoin prices, its sensitivity to M2 liquidity will continue to diminish. Additionally, the behavior of over-the-counter institutions purchasing Bitcoin has also reduced price volatility, which is truly where Bitcoin's confidence lies. Uncontrolled financial expenditure will be absorbed by Bitcoin, continuing to move towards a bright future.
Psychological Perspective
The wider the adoption of Bitcoin, the stronger its stability at the psychological level. The influence of retail sell-offs will weaken, and as market dominance shifts to institutional buyers, the volatility caused by retail investors will also decrease.
Overall, Bitcoin remains one of the most promising assets in the world, and its growth model is undergoing a transformation from cyclical growth to linear growth (on a logarithmic scale). Global liquidity has become the dominant force in the current market, and unlike the top-down (from institutions to retail) dissemination path of most assets, Bitcoin has achieved penetration from the bottom up, from grassroots to mainstream institutions. For this reason, we are witnessing the market趋于稳定 in its maturation process, and its evolutionary model is becoming increasingly standardized and orderly. (Image source: DeathCab)
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Is the four-year cycle coming to an end? Bitcoin is losing its "grassroots soul".
Author: Two Prime
Compiled by: Tim, PANews
Original Title: From Retail Frenzy to Institutional Dominance, Is Bitcoin's Four-Year Bull Market Cycle Coming to an End?
There has been a lot of discussion around Bitcoin's four-year bull and bear cycle. This pattern of exponential rises, sudden crashes, and then climbing to new highs has characterized most of Bitcoin's history. However, it must be pointed out that there are ample reasons to suggest that this four-year cycle may be coming to an end.
We need to first raise a question: why does a four-year cycle occur?
It can be summarized into three factors:
Halving Effect
Every time the number of blocks increases by 210,000 (approximately four years), the Bitcoin mining reward is halved. This mechanism typically causes a price increase in the following years by creating a supply shortage.
Asset scarcity is often measured by the stock-to-flow ratio (S2F), which is the ratio of the existing total supply to the annual new supply. Taking the scarce asset gold as an example, its S2F ratio is 60 (which can fluctuate slightly due to new gold mine discoveries). The current Bitcoin S2F ratio is approximately 120, meaning its annual new supply is only about half that of gold. This number will increase with each halving thereafter.
Global Liquidity Cycle
The correlation between Bitcoin and global M2 liquidity has been explained multiple times by us and various institutions. It is noteworthy that many believe liquidity also follows a cyclical pattern of about four years. Although its accuracy is not as high as the metronome-like precision of Bitcoin halving, this correlation does exist. If this theory holds, the phenomenon of Bitcoin moving in sync with it would have reasonable logic.
Psychological perspective
Whenever a wave of frenzied bull market appears, it gives rise to a new round of popularization. People's behavior patterns confirm Gandhi's assertion: first they ignore you, then they laugh at you, then they fight you, and finally you win. This cycle repeats itself, and approximately every four years, people further accept the value of Bitcoin, endowing it with stronger legitimacy. People always fall into excessive excitement, and the subsequent crash sends the entire cycle back into motion.
The question now is, are these factors still dominating the price of Bitcoin?
After each halving, the trend of the newly added Bitcoin quantity accounting for the total supply decreases increasingly weak. When the newly added supply accounted for 25% of the total supply, the drop to 12.5% had a significant impact; however, now the decrease from about 0.8% to 0.4% has a much lesser actual impact.
Global liquidity remains a relevant factor for Bitcoin prices, although this influence is undergoing a transformation. Bitcoin is shifting from a retail-driven market to an institution-driven one, altering trading behavior. Institutions are engaging in long-term accumulation, and short to medium-term price declines will not shake them out of the market. Therefore, while global liquidity will still affect Bitcoin prices, its sensitivity to M2 liquidity will continue to diminish. Additionally, the behavior of over-the-counter institutions purchasing Bitcoin has also reduced price volatility, which is truly where Bitcoin's confidence lies. Uncontrolled financial expenditure will be absorbed by Bitcoin, continuing to move towards a bright future.
The wider the adoption of Bitcoin, the stronger its stability at the psychological level. The influence of retail sell-offs will weaken, and as market dominance shifts to institutional buyers, the volatility caused by retail investors will also decrease.
Overall, Bitcoin remains one of the most promising assets in the world, and its growth model is undergoing a transformation from cyclical growth to linear growth (on a logarithmic scale). Global liquidity has become the dominant force in the current market, and unlike the top-down (from institutions to retail) dissemination path of most assets, Bitcoin has achieved penetration from the bottom up, from grassroots to mainstream institutions. For this reason, we are witnessing the market趋于稳定 in its maturation process, and its evolutionary model is becoming increasingly standardized and orderly. (Image source: DeathCab)