Bitcoin's Four-Year Cycle: Myth or Reality?
The Halving Cycle Debate
Bitcoin's price movements have often been linked to a supposed four-year cycle tied to its halving events. However, recent analysis suggests this cycle is more of a myth than a reality.
"The idea of a predictable four-year pattern is based on flawed statistics and selective data."
Market Adjustments and Information Pricing
The halving events, where the reward for mining new blocks is cut in half, have been known in advance. This means markets continuously adjust to this information, rather than reacting in a cyclical manner every four years.
Statistical Flaws and Data Limitations
- Limited Data Points: Bitcoin's history contains only four such "cycles," which is too little data to confirm a repeating pattern.
- Multiple Testing Problem: With enough backtesting, some periods will appear statistically significant by chance.
- Cherry-Picking Data: Analysts often cherry-pick periods that look cyclical while discarding the rest.
Survivorship Bias and Non-Stationarity
- Survivorship Bias: Popular models gain prominence when the price aligns with their forecasts, only to fail in later periods.
- Non-Stationarity: The statistical behavior of Bitcoin changes over time due to factors like liquidity, derivatives structure, institutional participation, regulatory landscape, and miner economics.
Curve Fitting and Non-Falsifiability
Most visual cycle charts rely on curve fitting. Analysts can adjust log scales, trendline angles, smoothing functions, and starting points to make nearly any upward-drifting asset appear cyclical.
Current Market Status
Bitcoin is attempting to stabilize after defending support at the $86,700 area. Buyers have pushed the price back above $91,500, although the rebound remains corrective while Bitcoin trades below the 20-day and 50-day EMAs at $93,200 and $100,500. The broader structure remains capped by a descending channel that has rejected every rally since the $124,000 peak.
