A Stanford MBA has provided insights into why the current Bitcoin cycle has been distinct from previous ones and why the next one could be even more substantial. In the realm of Bitcoin, a “cycle” refers to the period between two consecutive halvings, which are events cutting the rewards miners receive in half for solving blocks on the network. These halvings are crucial milestones for the cryptocurrency, as they significantly impact its supply and valuation dynamics.
Jesse Myers, the Stanford MBA, released a post comparing the current cycle with past ones. Notably, this bull market displayed a bi-modal rounded top spread over six months, in contrast to the parabolic advances culminating in blow-off tops seen in previous cycles. The divergence in price behavior can be attributed to four main factors.
Firstly, the unprecedented occurrence of COVID-19 and the subsequent economic fallout influenced the cycle’s initiation. The US government’s response, including Quantitative Easing (QE) measures like stimulus checks, notably fueled the 2021 Bitcoin bull market. However, the shift to Quantitative Tightening (QT) marked the Bitcoin top in November 2021, causing market disruptions.
Additionally, the May 2021 China ban on Bitcoin mining, targeting the biggest hub for cryptocurrency mining, introduced significant selling pressure and halted the bull rally prematurely.
Looking ahead, Myers suggests that these specific factors are unlikely to repeat in the next cycle. However, two other factors, leveraged futures trading, and the issuance of “paper Bitcoin” by platforms like FTX, may reappear.
Moreover, the current cycle witnessed smaller entities accumulating a considerable portion of newly mined Bitcoin, potentially indicating a shift in market dynamics.
Considering all these factors, Myers assigns probabilities to different price range predictions for the next cycle. He believes that a growth of more than 8x, surpassing the current cycle’s performance, is the second most probable scenario, which would be a first in Bitcoin’s history.
As the upcoming halving event approaches, the market’s supply shock is expected to tighten further. The possibility of a shift back towards QE and increasing interest from institutional investors like Blackrock could positively impact the market during the next cycle.
In summary, the Stanford MBA’s analysis points to a potentially more significant Bitcoin cycle ahead, with unique factors shaping its trajectory and the possibility of unprecedented growth.
