The circular hypothesis competes with the classical concepts of the Bitcoin cycles and their lengthening. According to this type of analysis, the price of BTC is reaching the bottom in the current cycle.
The traditional concept of Bitcoin cycles has received new insights from technical analysts. A circular analysis indicates that the pioneering cryptocurrency will soon reach the bottom and start a new bullish cycle.
This analysis describes the classical concepts of Bitcoin cycles and their lengthening cycles, which govern the cryptocurrency market. Against these, the circular hypothesis looks interesting, although it is still in its early development stages.
The Classical Concept of BTC Cycles
The classical concept of Bitcoin cycles juxtaposes historical price action with the halving occurring every four years. This event reduces the reward of miners, which is at 6.25 BTC per block but will drop to 3,125 BTC in 2024.
The following Bitcoin single-cycle pattern usually occurs soon after the halving event. During a bullish market, a parabolic rise lasts for about a year and ends with a bang spike. A bearish market consists of a sharp decline of about a year and a macro bottom. There is a consolidation in which Bitcoin undergoes a two-year sideways trend stage, leading to another halving.
That pattern seemed to fit the historical data of the early days of BTC trading. However, some analysts argue that the price action of the last two years has invalidated the classical Bitcoin cycles hypothesis.
They say the primary reason is the lower-than-expected all-time high and the lack of a burst high. Most cryptocurrency experts predicted that the price of BTC would reach above USD 100,000 in 2021.
The Concept of BTC Lengthening Cycles
Benjamin Cowen, the leading promoter of the Bitcoin lengthening cycles, said in early May 2022 that the hypothesis was dead. He did so amid a lengthy bearish market when Bitcoin was still worth USD 35,000.
That hypothesis assumed that lengthier successive cycles in the cryptocurrency market produced decreasing returns on investment (ROI). In the second half of 2021, it seemed the current bullish market would last more than the previous ones. In addition, Cowen even assumed there would be a cycle peak between USD 100,000 and USD 200,000.
However, the sharp drop in the price of cryptocurrencies after November 2021 did not allow him to defend this hypothesis anymore. In addition, Bitcoin fell below the all-time high of the previous cycle for the first time in history.
The New Hypothesis of Bitcoin Circular Cycles
Due to that collapse and doubts about the above concepts and the S2F model, analysts have developed new constructions. The hypothesis that Bitcoin cycles fit into self-similar circular patterns is their latest attempt.
However, analysts have not yet developed a single widely accepted concept. For now, they are only making the first attempts to fit the historical price action of Bitcoin into declining circular patterns.
Although successive circular circles look smaller, their perimeters cover a broader price range on the Y-axis over time. However, the X-axis remains on a regular scale, indicating that the cycles would become shorter. In addition, the price would reach successive peaks faster, contrary to the lengthening cycles hypothesis.
By Alexander Salazar
