22.12.23

The Bitcoin 4-year cycle has an enormous impact on the price and movement of Bitcoin as it controls the supply of Bitcoin coming into the market.

Every four years, the Bitcoin mining reward gets cut in half. The mining reward is a fee paid to Bitcoin miners for maintaining the Bitcoin network. Here's an image Brian shared on January 18th 2023 explaining these cycles. 

The last Bitcoin Halving happened on April 22nd, 2024. The next halving is expected around 17 Apr 2028.  

When a halving occurs, the Bitcoin block reward halves. This slows the supply of Bitcoin into the market. Lower supply often increases prices, so Bitcoin gets more valuable. As demand increases and supply lowers, prices should increase.

Since the halving happens every four years, we can break down the cycle year by year and analyze what price action might look like.

This is where Bitcoin’s price reaches its lowest point in the cycle and bottom out. The new traders who entered at the previous cycle peak get washed out and capitulate. Now, the bitcoin price can’t go any lower. After reaching this bottom, the price often retraces up to a 50% or 61.8% reload zone. 

Like gold and other commodities, Bitcoin often bottoms out around its cost of production level. This is because the miners (the ones paying electric fees to produce bitcoin) are not motivated to sell below this level. Some miners capitulate at the bottom or must halt production because it’s costing too much. This puts a floor in the Bitcoin price and the market bottoms.

Here’s a video where Brian warned that we are nearing a peak and a follow-up showing how we are nearing the cost of production. This video beautifully summarizes these two parts of the market in real time.

The halving part of the cycle happens between the Bottom and the Consolidation phase.

In this phase, Bitcoin continues from the bottom and gains traction. It ranges by either going sideways or sideways and up with a potential capitulation dump and quick reversal. This year, the price can stay around a similar range while consolidating the base and finding its footing.

This is an exciting and dangerous phase of the cycle where Bitcoin takes off. Its blow-off top phase is often euphoric and accompanies incredible greed flooding the market. This is also the peak time for scams, nefarious players, and market newbies entering at the top.

After the big blog off-top party, Bitcoin tops out and starts its bear market. In the hangover part of the cycle, the prices drop significantly. The public who bought the top of the market is stuck or washed out.

Bitcoin follows a 4-year cycle similar to the famous emotion cycle. The Emotion cycle tells you what most players in the market are feeling. People are most optimistic and euphoric during the peaks, and during the bottom, the most panic and capitulation.

Here Brian outlines his fear-greed cycle chart with the Dow Jones Industrial Average with Bitcoin chart overlayed showing how the cycles interact.

When Bitcoin hit around $16k this cycle, Brian's warning to "Get your sh*t together" was clear as day!

We called the 2023 bottom this year in a blog post outlining the 7 studies that suggest crypto and the stock market are bottoming this year.

Here's a link to the full blog post: 7 Studies That Forecast a Bottom in the 2023 Stock Market Including the January Barometer, Wyckoff Pattern, Benner Cycle & More

One study mentioned was the Benner Cycle study telling us that 2023 was a bottoming year.

With 2024 coming up, we’re in a phase where Bitcoin is just getting moving. It will have a continued consolidation period before its blow-off top, and then the cycle begins again.

Knowing this cycle is important to investors because you can avoid coming into the market during a blow-off top phase. Use that opportunity to pay yourself and take profits. During the bottoming years, you know to dollar cost average into the market, so you’re ready for the bull phase of the cycle.

Here’s a quick infographic showing all the cycles in context. This Market Cycles Cheat Sheet outlines 10 major market cycles, 20 industry sectors in the sector rotation model, and much more. 

Here's a link to the full blog post: 10 Market Cycles Explained in One New Infographic That Simplifies Your Investing

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