Analyst: Bitcoin’s Cycle Remains, But Its Drivers Are Evolving

Markus Thielen, the head of research at 10x Research, discusses the evolving dynamics of Bitcoin’s four-year cycle. While this cycle is still relevant, its influences have shifted from simple halving events to more complex factors like political developments and liquidity conditions.

Key Takeaways

Bitcoin's four-year cycle is still present, but its driving forces have shifted.
Political events and central bank decisions now play a more significant role.
Recent Fed rate cuts have led to cautious behavior from institutional investors.
The dynamics of market liquidity are crucial in understanding Bitcoin's price movements.

Bitcoin

The Shift from Halving to Politics and Liquidity

Markus Thielen pointed out that Bitcoin's significant price peaks, observed in 2013, 2017, and 2021, all occurred in the fourth quarter. He suggests that these peaks align more closely with election cycles and political uncertainties than the timing of halvings. Thielen noted rising concerns about whether the current president's party will retain control over Congress, affecting policy and investor decisions. While discussing political scenarios, he referenced former US President Donald Trump, indicating that political situations shape market expectations, which in turn influence prices.

"The four-year cycle is still intact, but it’s driven by midterm elections, not the halving." - @markus10x

Liquidity and Institutional Caution

The recent cuts to the Federal Reserve's interest rates did not lead to the typical broad rally across risk assets. Institutional investors—who are playing an increasingly significant role in cryptocurrency markets—are being more cautious as signals from policies remain mixed and liquidity appears tighter.

According to Thielen, capital flowing into Bitcoin has slowed compared to the previous year, easing some of the buying pressure that had previously supported price increases. Arthur Hayes, co-founder of BitMEX, echoed this sentiment in October, stating that global liquidity, rather than a fixed four-year cycle, has historically driven major movements in cryptocurrency. He mentioned that while halvings can occasionally coincide with price rallies, this is often by chance.

Bitcoin Trading BTCUSD currently trading at $89,250. Source: TradingView

Recently, Bitcoin dipped below $90,000 during low-volume trading, reflecting weak demand. In contrast, Ether showed relative strength while most altcoins lagged behind. Traders are positioning themselves ahead of a week filled with significant US data and central bank announcements, placing higher importance on signals that affect liquidity and risk appetite. With institutional investors closely monitoring macroeconomic indicators, future momentum is likely to be driven more by liquidity flows than by calendar events.

The central point to take away is that while the four-year cycle can serve as a guide for expectations, it should not be viewed as a strict rule. Halvings impact supply and miner economics and are indeed important to some market participants. However, in a marketplace increasingly influenced by large funds and ETFs, the primary drivers are cash flow and credit conditions.

When liquidity is plentiful, prices have the potential to rise sharply. On the other hand, tighter conditions can bring rallies to a halt. This understanding is a core aspect of both Thielen’s and Hayes’s analyses.

In summary, the forces shaping Bitcoin's cycles have transitioned from relying solely on predictable halving schedules to a landscape influenced by macroeconomic policies and political timelines. Market stakeholders are increasingly responsive to economic news and decisions from central banks alongside the blockchain's reward structure.

Featured image from Unsplash, chart from TradingView.