An Obituary For Bitcoins Cycle


Dilution-proof, April 28, 2021

On January 3, 2009, Satoshi Nakamoto launched the Bitcoin network by mining the first block (the “genesis block”) in the Bitcoin blockchain. Today, a bit more than 12 years later, the network stores over $1 trillion in value and transfers more than $20 billion in on-chain volume on a daily basis. To get there, bitcoin went through multiple boom and bust cycles in which it was praised to the moon and declared dead many times over—every time to resurrect from the death. This process kept repeating in a roughly four-year cycle that led many to believe that there is a certain predictability to long-term bitcoin prices, of which PlanB’s popular Stock-to-Flow (S2F) model is the most well-known attempt.

In this article, we’ll first take an in-depth look at why the bitcoin price moves in a four-year cycle related to its halving schedule. We then dive into how this market cycle influences more fundamental properties of the Bitcoin network itself that are related to the behavior of miners and users. Finally, I introduce a hypothesis for how the maturation of the Bitcoin network itself will eventually extinguish its four-year cycle, and explain why this would be a good thing for the network and its users.




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