Authored by: @hetty-rowan

We have heard many times in recent months that this year is a "Supercycle" for Bitcoin, and for cryptocurrency in general. Whether that is the case, I'll leave that up to you. I am not going to pretend that I have enough insight into the price of Bitcoin, nor that I would understand the normal cycles of Bitcoin and cryptocurrency. But what I was curious about is the following.

WHAT IS A SUPERCYCLE NOW?

Anyone can tell me more, and yes of course I feel a tingling when I read that we are going to experience a Supercycle. And yes, of course I hope we get a Supercycle, ... Or do we already have one? Or ... we don't have it, and we don't get it. And if we get a Supercycle, what does that actually mean? I don't know if you had the same questions about that. But for me it was reason enough to start looking for some more information. Because such a concept does not just appear out of thin air. It's based on something. And I wanted to know. You too? Then read on!

A super cycle in crypto terms is the phenomenon that a price increase due to more certainty in the market only causes more price increase.

Now I understand that this sounds a bit vague, and perhaps a bit complicated. No worries. It's not vague, and it's not complicated either. Just a simple explanation: people are interested in a positive change of Bitcoin. Let me use an extreme example for this. Let's say the Bitcoin ban is lifted in China. Many new interested people would probably step in now, and this would drive the price up considerably.

As a result of the price being driven up by increasing demand, even more people are beginning to trust Bitcoin and start making a profit from it. These people are now also deciding to buy Bitcoin. But also the people who previously had Bitcoin will probably buy more Bitcoin because they also see the price rise and their already high confidence grows even more.

All this leads to an even higher demand and therefore an even higher price. When we are in a Bitcoin supercycle, this process continues and the price will continue to rise. And of course with the ever increasing prices, the possible profits are also very large, although this also applies to the losses. Those can also be big if you get in when the Supercycle is nearing its end.

Previously, the term supercycle was mainly used for an upward trend in the prices of, for example, raw materials that could sometimes last for decades. Today, however, the term is mainly used to indicate an ever increasing trend in cryptocurrencies, for example Bitcoin. The difference is that this upward trend sometimes only takes a few months for crypto to be called a super cycle.

What's going on with Bitcoin?

Bitcoin continues to become more and more popular, and has been for several years now. In addition to its popularity, Bitcoin is also increasingly accepted worldwide. Bitcoin and crypto in general is going more and more mainstream! As a result, more and more people see it as a serious investment, because nowadays there is also an actual use case associated with it.

This is a clear difference from before, when Bitcoin was still mainly a speculative investment. It is now increasingly becoming a store of value and is also seen by many people as a hedge against inflation.

Bitcoin is becoming more accessible to the masses

Bitcoin is becoming more accessible, more accepted and it is getting more and more useful. For example, more and more online webshops accept Bitcoin as a means of payment and there are also more and more ways to physically spend your Bitcoin. There are already many ATMs in America where you can simply withdraw with Bitcoin. Not so long ago, even the first Bitcoin ETF was launched. This is VanEck's Bitcoin ETF and can be purchased on the Canadian stock exchange. It has recently become possible in principle to purchase Bitcoin on the traditional stock market.

All these usefulnesses that are added to Bitcoin thus create more interest in Bitcoin as an investment. This growing interest creates more demand, which in turn drives the price up. As a result, more and more investors get on the Bitcoin train and therefore the price could just get higher and higher. This could just cause another Bitcoin supercycle.

Now I think we can say that from January to April we did see a Bitcoin Supercycle! But what does that mean for the rest of this year?

Is the end of a supercycle always a crash?

If a supercycle is the phenomenon where the price keeps getting higher and higher, it's not illogical to think that the end of a supercycle is a crash. And indeed, there is a very good chance that there will be a significant dip at the end of a supercycle. For example, a 20% dip at the end of a super cycle is not bad. But it certainly doesn't always have to be the case that the entire market collapses at the end of a supercycle.

The probability of a dip at the end of a supercycle may only decrease for Bitcoin in the future. This is because Bitcoin continues to gain more usability. Bitcoin can be used in more and more ways, and also in more and more places.

This could make Bitcoin more “indispensable” in the future, causing it to stabilize more in price. Should this happen, the dip at the end of a supercycle would probably be reduced, or even disappear altogether. However, the price increase in the supercycle would probably also be less significant.

The role of FOMO in a supercycle

FOMO plays a major role in the supercycle. This fear of missing out is of course an indispensable factor in the emergence of a supercycle. When the initial price increase occurs, as a result of the increase in usability, then probably comes the fear of missing out.

People then see that the price is rising and more and more people are investing. They are then afraid that the price will go up further and these people will make a lot of profit, without them doing this themselves. This makes them invest.

So this is part of the extra demand that arises as a result of the initial price increase and if this effect continues as a kind of snowball, there is certainly a chance that a super cycle will develop.

So be careful when you see something like this happen! We all know, FOMO is not helpful to be your guide in this market. Although we are all familiar with this counselor to a greater or lesser extent.

How do you recognize a super cycle?

Bitcoin has of course only existed since 2009. Compared to other financial markets, the market is therefore very new. The price history is therefore very short, which makes it difficult to recognize real recurring patterns and to tick them off as reliable. However, there are some things that we have already experienced several times that allow us to say something about recognizing a super cycle.

^{However, this remains speculation and there is therefore no certainty involved. This should therefore never be taken as financial advice.}

From what we can see now, it seems that a cycle in the crypto market lasts about 4 years. This cycle has so far consisted of a massive upswing followed by a massive downturn.

Bitcoin's cycle is led by Bitcoin's halving. The most recent halving that took place was in 2020. This means that (if history repeats itself) we are about 1 year into the cycle at this moment (2021).

When we look at the previous cycles that have already taken place, we can say that the supercycle consists of 4 phases. These are: the accumulation phase, the continuation phase, the parabolic phase and the correction phase.

The accumulation phase

The first phase is the accumulation phase. This is the stage where the price rises, as a result of increasing investor interest. They are becoming more interested because Bitcoin is getting more and more functionalities. Consider, for example, the adoption of Bitcoin by a billion-dollar company, such as Amazon.

This phase lasts until the cycle enters the continuation phase. The accumulation phase is generally the phase where it is best to buy Bitcoin in order to achieve the maximum profits. However, this is purely based on what has happened in the past and should not be taken as financial advice.

The continuation phase

The second phase is the continuation phase. As a result of the accumulation phase, the price has risen sharply, until it enters the continuation phase.

The continuation phase is the phase in which the halving takes place. This then heralds another wave of demand and price surge until Bitcoin finally enters the parabolic phase.

The parabolic phase

The third phase, the parabolic phase, is the phase in which the all time highs are generally reached, looking at the past.

Basically, this is the stage where the experienced investors sell their Bitcoin assets, or at least some of them. This can lead to some significant price corrections and this period can be recognized by its enormous volatility.

The correction phase

The parabolic phase generally creates a lot of hype around Bitcoin. After this, correction generally takes place. This correction can be very large. Historically, the correction at this stage has averaged 80%.

Where are we now in the cycle?

After reading this information I must honestly say that I am starting to have my doubts about the moment of the cycle we are in NOW. Because if I read a bit like this, we have actually experienced all phases since the halving in 2020.

I'm not going to make statements about what my expectations are, but keep it neutral with the conclusion that it was enlightening to read about what exactly the term "SUPERCYCLE" means. Because that wasn't quite clear to me yet.

Okay, a small statement then... I hope from the bottom of my heart that the many predictions are correct and we have not yet reached the end of the bull market. But, that doesn't mean I'm going to think seriously about the DCA technique myself ... because inevitably, there will be a bear market. The question that still remains open is actually kind of, when are we going to see the next Bitcoin Supercycle?

Posted Using LeoFinance ^Beta