The four-year cycle narrative in the cryptocurrency market seems to be losing traction. As the year progresses without a significant drop at the start, this could mark the change stakeholders are observing. Currently, Bitcoin 
$89,476 is experiencing fluctuations, dropping below $90,000 with trading volumes modestly recovering even as spot prices decline. Why won’t we witness a repeat of the peaks in 2013, 2017, and 2021? What does the new era hold for cryptocurrencies? These are the questions we delve into today.
The End of Past Bull Runs
Markus Thielen of 10x Research challenges the prevalent belief that the “four-year cycle” is over. He argues that the impact of Bitcoin halving still remains, but the focus has now shifted towards politics and liquidity. Having solidified its status as a novel asset class, Bitcoin has undergone the transformation it long awaited.
Halving may hold less significance now, with the cryptocurrency cycle revolving around three pivotal factors.
- The US election calendar.
- Central bank policy.
- Capital flow into risk assets.
Highlighting the market surges in 2013, 2017, and 2021, Thielen links these events to electoral cycles. Last year’s increase was election-driven, but Trump’s erratic actions influenced the cryptocurrency landscape.
“There’s uncertainty over whether the incumbent president’s party will lose many seats. This could parallel Trump or the Republicans losing many House seats. Therefore, perhaps he won’t push many contentious issues on his agenda.” – Markus
If Trump scales back his aggressive posture, cryptocurrencies might enjoy better conditions next year, possibly entering a true bull market phase. However, as M2 supply increases, the market must also see strengthening liquidity with the Fed cutting interest rates more than twice, and Trump initiating typical election-time economic fairs.
Why Aren’t Cryptocurrencies Rising?
The Fed implemented three consecutive rate cuts, wrapping up QT as of this month. Although not quantitative easing, they’ve commenced buying short-term bonds worth $40 billion to balance liquidity. Thielen notes that institutional players, now dominant in crypto, squeeze prices due to the Fed’s mixed signals. It’s noteworthy that ETFs currently house more Bitcoin than all cryptocurrency exchanges.
We should focus on ETF flows and institutional orientation for future signals. Furthermore, the liquidity slowdown in the US dollar and the Chinese yuan, recently pointed out by Hayes, should reverse. We look for genuine capital influx into risk markets under abundant timing. Thus, cryptocurrencies could rally. However, a crash akin to 2022 or 2018 seems unlikely.
