The Relationship Between Bitcoin Cycles and Halving Events: Fact or Coincidence?
For a long time, it has been believed that Bitcoin’s four-year cycles are directly tied to the halving events, where block rewards are reduced. However, a new theory has emerged challenging this assumption.
An Alternative View: Coincidence or Correlation?
According to recent theories circulating on crypto social media, the past three major market cycles for Bitcoin and crypto may be mere coincidences rather than a direct result of halving events.
Bitcoiner ‘Pledditor’ argues that these cycles are closely correlated with the global M2 money supply, which has been experiencing its own “4-year cycles.” This correlation has been observed across various risk assets, including Bitcoin.
Understanding the Global M2 Money Supply
M2 refers to a broad measure of the money supply, encompassing currency and various types of bank and money market mutual fund deposits that are highly liquid.
Chart analysis reveals that the previous three Bitcoin cycle peaks coincided with significant changes in the global M2 money supply. The most recent cycle, for instance, occurred during the pandemic when M2 experienced substantial growth due to central bank stimulus measures.
Renowned GMI CEO Raoul Pal previously suggested a similar connection between BTC cycles, macro patterns, and M2 growth.
Exploring the Relevance of Halvings
Author Vijay Boyapati, in a recent podcast with Stephan Livera, questioned the continued relevance of the four-year cycles. He pointed out that maintaining the current price level requires a significant amount of daily inflow into the Bitcoin market.
However, after a halving event, the required financial energy to sustain prices decreases, resulting in upward price pressure. Boyapati believes that the halving still impacts Bitcoin’s price due to the significant increase in its total market cap.
The Future of Bitcoin’s Cycles
The next Bitcoin halving event is expected to occur around mid-to-late April. Analysts remain confident that this will spark a rally and usher in a new bull cycle by late 2024.
Hot Take: The Intriguing Connection Between Bitcoin Cycles and Global Macro Patterns
While the assumption that Bitcoin’s cycles are solely linked to halving events is being challenged, the alternative theory suggests a fascinating correlation between these cycles and the global M2 money supply. Whether this relationship is coincidental or causal, it highlights the complex interplay between cryptocurrencies and macroeconomic factors.
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