Former BitMEX CEO Arthur Hayes argues that central bank policies, not halving cycles, increasingly dictate Bitcoin’s long-term price movements.
Bitcoin prices almost dropped to a level that was last seen in June against the backdrop of liquidations exceeding $19 billion last week, which has made a number of traders dust off the traditional “four-year cycle” rulebook to make their next moves.
Some market observers believe the four-year Bitcoin cycle is nearing its end, but a group of traders in the community is loyal to the rulebook. These market participants are selling their holdings in the belief that the crypto market slump is not done yet.
A Bitcoin cycle, purportedly lasting for about four years, begins with a halving, which causes a bull run, followed by a sharp crash, and finally a prolonged period of price stability. The process resets with the next halving event, when Bitcoin’s block reward for miners is cut in half to reduce the number of new coins entering circulation.
Bitcoin peaked at an all-time high of $67,000 in November 2021 before sliding downward, so many traders now predict the market is approaching the end of that four-year phase.
“The four-year cycle is not a crypto thing. This is the S&P 500 from 1920 until 2002, literally all lows with the exception of two align with a four-year cycle. So the likelihood of it still happening for Bitcoin is high. We’re in the end game now,” said one market watcher on X
Does Bitcoin halving still have an effect on markets?
Bitcoin’s halving, hard-coded into the network’s design, reduces miner rewards by 50% approximately every four years. Because these rewards are the only source of new Bitcoin, each halving cuts the rate of new supply in half.
The scarcity created by this event leads to a demand spree that starts euphoric bull markets for which Bitcoin is known to reach new all-time-highs. When prices rise, miners tend to hold their newly mined coins rather than sell immediately, hoping for greater returns later.
This constraints supply, creating what many analysts describe as a “supply shock” that propels demand even higher.
Once the ensuing bull run cools, the market enters a lengthy readjustment period, which usually lasts for about 1.5-2 years, until the next halving renews the interest of investors for the “bull season.”
“After the crash that ends a bull run, there’s a long readjustment period where the price of Bitcoin is relatively stable. This can last around two years, and it’s boring, but it’s also the time to buy as much Bitcoin as you can before the next halving kicks off the next cycle,” one Reddit user explained.
That said, Wintermute desk strategist Jasper De Maere believes buying coins before the halving and selling soon after when prices fail to surge is outdated.
“When BTC underperforms post-halving, it shakes their conviction, and you get some forced selling. But in my opinion, that strategy’s outdated. The halving just doesn’t move the needle anymore because miner rewards are tiny compared to total trading volume,” Maere surmised.
Global liquidity controls the Bitcoin cycle now
BitMEX co-founder Arthur Hayes wrote in a recent blog post that Bitcoin’s cyclical crashes and recoveries from halving events is becoming less relevant, because global liquidity is the main pain point dictating supply and demand.
As reported by Cryptopolitan, Hayes argued that actions by central banks like the US Federal Reserve dictate Bitcoin’s price trajectory more than the halving itself.
“The old script about Bitcoin’s volatility and proneness to crashing every four years is fading,” he wrote, suggesting that looser monetary policies could sustain long-term upward pressure on Bitcoin’s value.
According to the former BitMEX CEO, the Fed’s tolerance for inflation above its 2% target could support higher liquidity, opening doors for more investors to seek inflation hedges such as Bitcoin.
“That would mean increases to the money supply at a consistently faster rate than during past halving events,” Hayes explained, claiming this makes the traditional four-year cycle obsolete.
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