The 4-year Crypto Cycle Explained
Understand how market cycles work
By: Cezar Jinga, Community Manager, TOKERO
The concept of the 4-year crypto cycle is a pattern often observed in the cryptocurrency market, especially in relation to Bitcoin. This cycle plays a significant role in market price movements and can provide investors with valuable insights.
- The Halving
At the heart of the 4-year cycle is Bitcoin’s halving event, which occurs roughly once every four years. During a halving, the reward for mining new Bitcoin blocks is halved, reducing the rate at which new Bitcoin is generated. This event historically creates a rarity, which often leads to a price increase.
The expression “This time it’s different” is very common in crypto. Usually it’s not that different, but this cycle really was different from previous cycles. Bitcoin’s rise started long before the halving because in this cycle we had a new factor in the equation: bitcoin ETFs. Institutional money flooded the market, pushing bitcoin to a new all-time high (ATH) just before the halving occurred.
- The Bull Run
After a halving, the market usually goes into a bull run, where prices rise excessively. Investors, spurred by the dwindling supply of new bitcoins and the media hype surrounding the price spike, put money into the market, pushing prices to new highs. This phase typically lasts about a year and includes both institutional and retail investors. Unfortunately or fortunately, we have yet to see a bull market.
- Correction
After the period of accelerated growth, the cycle usually enters a correction period, where prices fall significantly from their peaks. This phase can be sudden and rapid, with market corrections of 30-50% or more. This period is crucial as it often weeds out speculators who entered the market during the hype. Remember 2018 or 2022? 👀
- Accumulation Phase
The final phase of the cycle is the accumulation phase, where prices stabilize at a lower level and the market enters a period of stagnation. During this time, long-term investors and institutions often accumulate assets at a discount in preparation for the next cycle.
This phase can last one to two years before the next halving restarts the cycle. Again, this time was different, and after the correction we didn’t see a very long accumulation phase, thanks to the optimism generated by bitcoin ETFs.
Conclusion: Understanding the 4-year crypto cycle can provide valuable insights into market behavior, helping investors make informed decisions. By recognizing the phases of the cycle (halving, Bull Run, correction and accumulation), investors can make better choices in this volatile market.
This type of cycle, while not guaranteed, has repeated itself several times since Bitcoin’s emergence, becoming an essential frame of reference for many investors in the crypto space.
