Bitcoin Supercycle 2024: Could this be the definitive cycle to bring an end to all cycles?
Although Dan Held's anticipated Bitcoin supercycle has not materialized, the conditions may be conducive for its realization sooner than many expect.
Bitcoin Halving Cycles and Market Dynamics:
Bitcoin (BTC), currently priced at $37,422, undergoes a halving cycle approximately every four years, reducing the supply of new coins awarded to miners. This event triggers a supply shock in the market, contributing to the significant price fluctuations observed in the past three cycles.
Factors Influencing the Market Cycle:
Various factors contribute to the market cycle, including network adoption, expanded use cases like the Lightning Network and NFTs, and the crucial element of institutional adoption. In 2020, Bitcoin educator Dan Held predicted a "supercycle," emphasizing increased network value, scarcity due to halving, and rising institutional adoption.
Crypto Winter and Institutional Support:
Despite expectations, the last cycle, which saw Bitcoin reaching an all-time high of $69,000 in 2021, did not receive sufficient institutional support to sustain the meteoric rise. The approval of exchange-traded funds (ETFs) worldwide, including Canada, Germany, Brazil, and Australia, did not provide the anticipated backing.
US Market Dominance and Spot Bitcoin ETFs:
The prominence of the United States in global equity markets, comprising 42.5%, suggests that the potential approval of spot Bitcoin ETFs in the country could be a pivotal factor in realizing Held's "Bitcoin supercycle." Notably, BlackRock's application for a spot Bitcoin ETF in June 2023 is seen as a significant development.
Emerging Trends in Global Crypto Adoption:
Chainalysis' "2023 Geography of Cryptocurrency Report" identifies India, Nigeria, and Vietnam as the top countries for crypto adoption. While the US ranks fourth overall, the differentiation between large institutional transfers and lower retail transactions highlights the evolving landscape of crypto adoption.
Value Perception and Historical Examples:
The perceived value of Bitcoin lies not only in institutional adoption but also in the perception of value by market participants. Historical examples, such as the dot-com bubble, underscore the importance of actual usage and adoption for sustaining value.
Potential Triggers for Bitcoin Adoption:
The potential dedollarization trend, coupled with credit rating downgrades for the US, could drive increased adoption of Bitcoin as an alternative to traditional currencies. If hyperinflation becomes a concern, Bitcoin might serve as a safe-haven asset.
The Early Stage of the Supercycle:
While Dan Held introduced the concept of a Bitcoin supercycle, he emphasizes that individuals are still early in terms of accumulating Bitcoin. Increased institutional adoption, coupled with factors like the upcoming halving in April 2024, could contribute to a potential supercycle.
Probabilities and Expert Perspectives:
Billionaire venture capitalist Tim Draper suggests that the next cycle, post-2024, might witness unimpeded business operations conducted in Bitcoin. Industry experts anticipate reduced supply post-halving, rising demand from Bitcoin ETFs, and growing interest in the asset.
Conditions for a Bitcoin Supercycle:
For a supercycle to materialize, institutional demand, reduced supply through halving, and increased adoption must align. Institutions like BlackRock entering the space may elevate Bitcoin to around $59,000, but the broader economic and sociopolitical climate's impact on Bitcoin adoption remains uncertain.
Looking Ahead: Possibilities and Challenges:
The Bitcoin supercycle may not be an immediate reality, given the current global speculation and ongoing adoption processes. Factors such as regulatory clarity, ease of access between traditional finance and crypto markets, and global recognition of Bitcoin as an asset could play pivotal roles in shaping the future of Bitcoin's market dynamics.