Bitcoin's Four-Year Cycle: Influenced by Politics and Liquidity, Says Analyst

As discussions around Bitcoin's potential drive toward a four-year cycle continue, analyst Markus Thielen asserts that this cycle remains relevant but is now swayed more by political and liquidity factors than previously believed.

Key Takeaways

Four-Year Cycle is Still Relevant: Markus Thielen suggests Bitcoin’s four-year cycle continues, but is influenced more by political events and liquidity rather than halving alone.
Influence of Elections: Historical peaks in Bitcoin align more with presidential elections and political uncertainty than with the halving schedule.
Impact of Fed Rate Cuts: The market’s cautious nature, even after recent Federal Reserve rate cuts, indicates a struggle for Bitcoin to regain upward momentum.
Focus on Political Catalysts: Investors should pay closer attention to US political dynamics and economic policies rather than solely relying on halving events for timing market movements.

Bitcoin's Four-Year Cycle: Influenced by Politics and Liquidity, Says Analyst

The Current State of Bitcoin’s Cycle

In a discussion on The Wolf Of All Streets Podcast, Markus Thielen, head of research at 10x Research, highlighted that while Bitcoin's four-year cycle is often perceived as being “broken,” it is essential to understand that it remains intact. However, the driving factors have transitioned from Bitcoin’s halving events to influences from U.S. election cycles, central bank policies, and the flow of capital toward risk assets.

Thielen pointed out that previous Bitcoin market peaks occurred in 2013, 2017, and 2021, all in the fourth quarter. He argued that these peaks seem to correspond more with presidential election cycles and political uncertainty than with the timing of Bitcoin halvings, which have varied over the years.

Thielen elaborated on the political climate, suggesting that the uncertainty surrounding the current administration's grip on legislative power might impact market dynamics. “There's this uncertainty that the sitting president's party is going to lose a lot of seats,” he remarked, indicating a potential stall in political agendas as the current election cycle unfolds.

Markus Thielen reporting that the four-year cycle remains relevant.
Markus Thielen says four-year cycle is not dead. Source: The Wolf Of All Streets

Fed Rate Cut and Its Effects on Bitcoin

Thielen’s insights come at a time when Bitcoin is struggling to regain its momentum following the Federal Reserve's recent rate cut. Traditionally, such cuts have provided a boost to risk assets; however, Thielen emphasizes that the current market environment is different. Institutional investors, who are now prominent players in the crypto space, are being more cautious, particularly due to mixed policy signals from the Fed and tightening liquidity conditions.

Moreover, there has been a slowdown in capital inflows into Bitcoin compared to the previous year, which lessens the upward momentum required for a significant price breakout. In Thielen's view, without a notable increase in liquidity, Bitcoin is likely to remain in a phase of consolidation rather than embark on a new upward rally.

Given these changes, Thielen urges investors to rethink their timing strategies. Instead of focusing primarily on Bitcoin's halving events, he suggests that market observers should monitor political influences, such as upcoming U.S. elections, discussions on fiscal policies, and shifts in monetary supply.

Contrasting Insights from Arthur Hayes

In another perspective, BitMEX co-founder Arthur Hayes argued in October that the four-year crypto cycle is no longer relevant. He claimed this shift isn't due to diminished institutional interest or changes in Bitcoin’s halving schedule. Instead, he stressed that relying on historical timing models to pinpoint the end of the current bull market is likely to lead investors astray.

Hayes posited that Bitcoin cycles have always been intrinsically linked to global liquidity rather than fixed four-year periods. He noted that past bull markets typically concluded when monetary conditions tightened—especially when liquidity from the U.S. dollar and Chinese yuan dwindled. Thus, he argues that the significance of halving has often been overstated, reflecting more of a coincidental occurrence rather than a direct causative factor.

Conclusion

As the landscape of Bitcoin evolves, it is increasingly clear that political and liquidity factors play pivotal roles in shaping its market cycle. Investors are encouraged to stay informed about these influential elements while being cautious about the traditional markers that have guided them in the past.

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