Since its launch about 12 years ago, Bitcoin (BTC) saw a series of bullish and bearish cycles, each longer than the last. What drives these cycles? Decred co-founder Jake Yocom-Piatt says the answer lies in the human brain.
“Bitcoin bullish and bearish cycles are functions of generic human psychology, attention spans and their deterministic and decreasing emission,” Yocom-Piatt told Cointelegraph.
Over the years, several personalities defended different arguments for Bitcoin cycles, including creator of the stock-to-flow model, PlanB, which projects future Bitcoin prices based on the halvings scheduled for every four years.
Bitcoin is unlike any asset that existed before its creation. Its programmed finite supply and ease of movement allow storage of values without borders.
One might ask, however, if the nature of Bitcoin as a programmed asset dictates its price cycles at some level, especially as that its mining reward is cut in half every four years, decreasing the production of Bitcoin to the market each time a block is extracted. Its maximum supply limit of 21 million can also be considered in the equation.
“The Bitcoin supply rate is steadily decreasing as a percentage of total circulation, with the addition of a substantial supply shock to each halving,” explained Yocom-Piatt.
“Bullish races occur when demand begins to exceed supply, raising the price, which draws the attention of less attentive investors. After a while, the attention of these myopic investors to a bull market declines and we return to a bear market. With each bull market, the general awareness of Bitcoin grows, sowing the seeds for the next bull run. “