What Is The 4-Year Crypto Cycle?

 

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The cryptocurrency market has seen some explosive growth since its inception when Bitcoin was first invented back in 2009. Every four years, the bitcoin halving poses a significant shift in momentum for the entire cryptocurrency market. Despite the bitcoin halving only directly affecting bitcoin as a token, this single event in the cryptocurrency market marks the beginning for something big for the next 4 years in cryptocurrency.

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What is the bitcoin halving? 

The bitcoin halving is an event scheduled to happen roughly every four years or after 210,000 blocks have been mined. This event lowers the rate at which new bitcoins are created by the network by adjusting the half reward for mining Bitcoin by validating transactions. 

The reward was originally halved in 2012, going from 50 bitcoins to 25. There were more halvings in 2016 and 2020, bringing the reward down to 12.5 and 6.25 bitcoins, respectively. Recently, the block rewards halved to 3.125 previously in April 2024.

How does the bitcoin halving affect the 4-year cycle? It’s simply supply-and-demand where the demand of bitcoin as a store of value increases while the amount being produced decreases each year, causing prices to be programmed to increase each cycle.

Historically, each 4-year segment between halvings have been observed to imitate similar price action. It starts with a halving dump due to miner capitulation, followed by the bull market, then topping off before plummeting about 80% to bear market lows, before finally rallying for the next halving event.

 

 
While the bitcoin logarithmic chart shows a linear increase with a few bear and bull markets happening, there is also another chart that cryptocurrency traders should pay attention to, which is the Bitcoin Dominance. Bitcoin Dominance (BTC.D) shows the amount of value that is circulating within the entire cryptocurrency market is being represented by Bitcoin.
 

In an event where the bitcoin price increases while the BTC.D decreases, it is a signal that other cryptocurrencies are aggressively outperforming bitcoin. This happens because market participants who have obtained massive profits from bitcoin look to rotate to higher risk, higher reward assets such as alt coins.

Based on the bitcoin dominance, money made from Bitcoin profits trickles down to much more risky assets. An important factor to consider when trading based on the 4-year cycle of cryptocurrency is the circulation of liquidity within the market.

 

 
The 4-year cryptocurrency cycle and its behavior has been observed in the past few halvings, in which analysts base their wild predictions on Bitcoin’s future price. While the historical context of bitcoin’s price action is a clear understanding of how important the bitcoin halvings are, there is still a level of uncertainty to consider when trading cryptocurrency due to its volatile and unpredictable nature as a speculative basket of assets
 

Author
Clyde Marcel Melgar
Web3 Writer
BitDigest

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