Newsletter 1: Lengthening Cycle Theory

Definition:

The hypothesis of lengthening Bitcoin cycles assumes that each successive cycle lasts longer than the last, measured from the absolute bottom to the absolute top of the BTC/USD price. Broadly, this theory suggests that Bitcoin's market cycles are lengthening between market bottom and market top.

Application:

The idea of lengthening cycles is not a new concept, but neither is it widely accepted within the cryptocurrency sphere. After all, there is a large proportion of the crypto community who have preached bitcoin’s four-year cycle. The issue with this is that there is little statistical evidence to support this claim. There may be a superficial conclusion which can be drawn from the fact that the last cycle spanned four years, but many participators in the space incorrect apply this conclusion to all market cycles.

This is a form of recency bias and is a result of investors pulling conclusions from recently favourable events without accounting for the wider market trends. This causes many participants to conclude a narrative and then manipulate the data to support it. Rather than perform analysis on the available data to identify trends and draw an informed conclusion.

A quick glance at the below graph shows that cycles are lengthening whether measured from bottom to bottom, bottom to top, or top to top:

Another way we can show lengthening cycles is the bitcoin market cycle return on investment as measured from Peak to Peak:

Both of these graphs indicate that the market cycle peak will occur at least some way through 2023.

Closing Thoughts:

Obviously these two graphs should be taken with a grain of salt. No one can tell you when exactly the cryptocurrency total market capitalisation will peak or when the perfect time to buy is. But we can use the data and statistical analysis to help us better identify where we are on the macro scale. At the end of the day, the data suggests one key takeaway:

There are lengthening market cycles within the cryptocurrency asset class.

With all of that in mind, we only have three market cycles to pull from. We still need far more data in order to draw more precise conclusions.

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D.C