The longer that you invest in Bitcoin, the more you will learn that Bitcoiners are extremely superstitious. Looking for signs or trends whenever possible. While Bitcoin is still very young, during its brief history there have been “sacred theories” that Bitcoiners believed deeply in. Trends that Bitcoin had never broken, and that we depended on, and thought would continue in the future. These ideas not only shaped what we thought we knew about the market, and how we invested but also gave us confidence in the market as well.
However, nothing lasts forever. That is something that we have learned the hard way in this crypto cycle with some of those sacred theories officially being broken.
Bitcoin Never Falls Below the Previous Cycle’s All-Time High
Throughout Bitcoin’s history, it had never fallen below its previous cycle's all-time high. During difficult stretches of the bear market, this was the one sacred theory that had always held true. This is why many people thought Bitcoin would never again fall below $20k. That is also why it sent shockwaves across the market when it actually did.
Many have argued that if it weren’t for black swan events including the summer of insolvencies and the FTX fraud, this theory would have remained intact. But, those events did take place, and Bitcoin went down to $15k.
Bitcoin is an Uncorrelated Hedge Against Inflation
Bitcoin was created to be an escape valve from today’s current fiat system. A way to protect your wealth from being inflated away. Up until 2020, it had acted like this perfectly, the sacred theory was intact.
But then covid took place, the US FED began aggressively raising interest rates, and the world moved into a recession. During Bitcoin’s biggest chance to date, it became extremely correlated with stocks, moving almost 1 to 1. For a short time, the sacred theory was broken and people’s confidence in it as a hedge against inflation began to lose steam.
However, things are beginning to turn around. As banks are beginning to collapse left and right. Bitcoin has emerged as one of the best possible places to put your money. As an escape from the fiat system, the prices have increased significantly. While this sacred theory was broken during the pandemic, perhaps it is coming back to life.
Bitcoin Moves in 4-Year Cycles
Perhaps the most sacred of all Bitcoin theories is that it moves in 4-year cycles centered around the Bitcoin halving. The halving takes place which cuts the issuance reward rate of Bitcoin in half. Then approximately 6 months later a BTC supply shock begins to take place in the market, resulting in the price of Bitcoin beginning to go parabolic. The market remains bullish for nearly 2 years, and then there is a blow-off-the-top type of moment. When sends the price down and in a bear market for nearly two years.
Up until now this has always been the case, and will likely continue to happen as the next few halvings take place. However, once the halving has cut issuance rates to a point where Bitcoin being mined is next to nothing. This could significantly reduce the impact of halvings.
Another point of view is that everyone could become aware of halvings and game the system. No longer waiting until the supply shock takes place, and instead, buy significant amounts before the halving takes place. Either outcome could significantly alter the 4-year cycles as we know it. Eventually, this sacred theory will come to an end as well, we just don’t know when.
While I was just as surprised as many of you were when Bitcoin fell below $20k and became extremely correlated with the stock market. But truthfully I believe it is a good thing for these sacred theories to be broken. Nothing is guaranteed with Bitcoin, and we need to be well aware of that. What happened yesterday, likely won’t happen tomorrow, and should expect the same from Bitcoin. Since its creation it has matured significantly, and so has the market. We must evolve with it.
How about you? What other sacred Bitcoin theories are there?
Read Exclusive Articles 1st on
or
As always, thank you for reading!
