It's exasperating to hear countless reports by so-called Bitcoin experts who seem entirely oblivious to the fact that Bitcoin's price follows a four-year cycle. To illustrate this point, imagine living in a region with significant seasonal changes, yet the local weather forecaster is clueless about the existence of seasons – their long-term forecasts would be wildly inaccurate. Shockingly, a large proportion of commentators, specialists, and journalists who delve into the realm of cryptocurrency exhibit the same level of cluelessness about Bitcoin’s price cycle as our imaginary weather forecaster's misguided long-term weather predictions.
Here's the crucial piece of information they're missing: approximately every four years, the reward for mining Bitcoin is halved, which instantly reduces the supply of new Bitcoin by 50% while simultaneously doubling the cost of mining each new coin.
Although Bitcoin's price experiences extreme volatility in the short and medium term – with dramatic increases or decreases possible within a week, day, or even hour – these fluctuations are driven by a complex and diverse array of factors that render them effectively random. However, when examined over a more extended period, a far more predictable pattern emerges. If you can grasp the concept of warmer days in mid-summer compared to mid-winter, you can understand the overall pattern of Bitcoin's price. The key difference is that the Bitcoin "year" spans approximately four years, during which a clear and repeating pattern is evident.
Using the halving event (when Bitcoin mining rewards are cut in half) as a reference point, we see an upward trend in price, peaking around a year to a year and a half later. Subsequently, the price trends downward for roughly two years before finally, between six months and a year before the next halving, it starts to climb once more in anticipation of the upcoming cycle.
Examine any long-term BTC chart with historical data, and you'll readily observe this pattern now that it's been highlighted. (Finding BTC on TradingView and clicking on Five years or all time takes only a few moments.)
What's most frustrating is the media's portrayal of this phenomenon. When Bitcoin prices approach their peak for the cycle, positive press coverage touts it as a lucrative investment, dramatically outperforming most traditional investments. This generates excitement and encourages people to buy at the worst possible point in the cycle. Soon after, the price plummets, the media proclaims the "bubble" has burst, and people sell – completely unaware that a new, even higher peak is likely less than four years away, thereby locking in unnecessary losses.
So, why should you care about all this? Here are a few essential takeaways:
- Purchase Bitcoin during "crypto winter" when prices are low.
- Avoid investing with funds you'll need in the next few years, as the next "crypto summer" peak is more than two years away.
- Don't panic or sell when "crypto winter" approaches, and the media declares Bitcoin dead.
- Conduct your own research, examining long-term charts to recognize the four year price cycle.
- Never invest solely based on the advice of media, online "experts," or even this article.
By understanding the patterns and cycles of Bitcoin's price, you can make more informed decisions and avoid falling prey to the sensationalist narratives that often dominate media coverage.