What is the Bitcoin supercycle? =

The Bitcoin (BTC) supercycle is a special phenomenon with which the course of the price in the future can be predicted. Historical cycles are often used, especially by crypto influencers, to predict what will happen in the future.

But what exactly are these cycles like? Can you really predict the future with it? And what is the best way to trade based on these cycles?

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  • Read quickly
  • What is the Bitcoin supercycle?
  • What’s going on with Bitcoin?
  • Is the end of a supercycle always a crash?
  • The role of FOMO in a supercycle
  • How do you recognize a super cycle?
    • The accumulation phase
    • The continuation phase
    • The parabolic phase
    • The correction phase
  • What’s the best way to trade in a supercycle?
  • Conclusion

The video below from ‘Bitcoin for Beginners’ explains the basics of the supercycle.

 

What is the Bitcoin supercycle?

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 .

Simply explained, it goes like this: people become interested by a positive change in Bitcoin. An example could be that the Bitcoin ban in China is lifted. The people who are interested start buying and this drives the price up.

As a result of the price being driven up by increasing demand, more people are gaining confidence in Bitcoin and that they can start making a profit from it. As a result, these people buy even more and the people who previously had Bitcoin may also buy more.

All this leads to an even higher demand and therefore an even higher price. When we are in a Bitcoin supercycle, this process goes on and on, causing the price to keep rising. A moment in which you can potentially make a lot of profit.

Previously, the term super cycle was mainly used for an upward trend in the prices of, for example, raw materials that could sometimes last for decades. Nowadays, however, the term is mainly used to indicate an ever-rising trend in cryptocurrencies, for example Bitcoin. In crypto, this upward trend sometimes only needs to take a few months before it is already called a super cycle.

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What’s going on with Bitcoin?

Bitcoin continues to grow in popularity and has been for several years now. In addition to its popularity, Bitcoin is also increasingly accepted worldwide. 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 form of value and is also seen by many people as a hedge against inflation.

Just as you normally diversify your equity portfolio, for example, or your fiat portfolio, it can be wise to do the same with your crypto portfolio. However, you should of course always determine this for yourself.

Bitcoin is becoming more and more accessible, more accepted and 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. For example, there are already many ATMs in America where you can simply withdraw Bitcoin. Not so long ago, the first Bitcoin ETF was even launched. This is VanEck’s Bitcoin ETF and it can be bought on the Canadian stock exchange. In principle, it has recently become possible to purchase Bitcoin on the traditional stock market.

So, all these utilities added to Bitcoin are driving more interest in Bitcoin as an investment. This growing interest creates more demand, which in turn causes an increase in price. As a result, more and more investors are getting on the Bitcoin train and the price could just get higher and higher. This could create a Bitcoin supercycle .

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 a major dip will take place at the end of a supercycle. A dip of, for example, 20% at the end of a super cycle is really not crazy. But it certainly doesn’t always have to be the case that the entire market collapses at the end of a supercycle .

The likelihood of a dip occurring at the end of a supercycle may only decrease for Bitcoin in the future. This is because Bitcoin is gaining more and more usability. Bitcoin can be used in more and more ways, and in more and more places.

As a result, Bitcoin could become more ‘indispensable’ in the future, causing it to stabilize more in price. If this were to happen, the dip at the end of a supercycle would likely be smaller, or even disappear altogether. However, the price increase in the supercycle would probably also be smaller.

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The role of FOMO in a supercycle

FOMO plays a major role in the super cycle. FOMO stands for fear of missing out and in the world of crypto it means that you are going to invest in something, not because you believe in it yourself, but because everyone is doing it and so are you . You actually do this to prevent you from missing out on profits that other investors do make.

This fear of missing out is of course an indispensable factor in the creation of a supercycle. When the initial price increase occurs, due to the increase in usability, the fear of missing out is likely to follow.

People then see that the price is rising and that 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 doing so 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 like a snowball, there is certainly a chance that a super cycle will arise.

So watch out when something like this arises and in most cases it is not smart to let yourself be guided by this fear of missing out, although it is of course not surprising that it arises in you. It is always smart to do your research first and only then invest . Never invest in something you know nothing about!

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. Still, there are some things that we’ve already experienced several times that allow us to say something about recognizing a super cycle. However, this remains speculation and there is 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 so far consists of a huge uptick, followed by a massive downturn.

Bitcoin’s cycle is guided by Bitcoin’s halving. This is when the reward for mining Bitcoin is cut in half. This will continue until all 21 million Bitcoin coins have been mined.

The most recent halving that has taken place was that of 2020. This means that (should history repeat itself) we are currently (2021) reasonably at the beginning of the cycle.

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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. We briefly discuss each of these phases in the next section.

The accumulation phase

The first phase is the accumulation phase. This is the phase where the price rises, due to increasing investor interest . They become more interested because Bitcoin is getting more and more functionalities. Consider, for example, the acceptance 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 in which you can best buy Bitcoin to get 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 increased significantly, until it enters the continuation phase.

The continuation phase is the phase in which the halving takes place . This then ushers in another wave of demand and price appreciation 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 achieved , looking at the past.

Basically, this is the phase where the experienced investors sell their Bitcoin assets, or at least part of them. This can lead to some major price corrections and this period can therefore 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 in this phase averages 80%.

However, as mentioned earlier, it is quite possible that both the increases and the decreases will become less extreme in the future. This would then be due to a decrease in volatility.

Ryan H Cease/Shutterstock.com

What’s the best way to trade in a supercycle?

Looking at supercycles, one thing is clear: the sooner you get to it, the better! The basics of what a supercycle is are clear. It’s a steady increase in price. So if you are early when a super cycle is really going on, there is a good chance that you will see your investment increase in value.

Do you think we are currently at the beginning of a super cycle and do you want to invest in it? Then you can do this via Bitvavo or Coinbase, for example. Do you want to know more about how to buy Bitcoin through one of these platforms? You can read this here.

When it comes to investing in Bitcoin during a supercycle, it’s very hard to say what you should do and we’re not allowed to, as we’re not financial advisors.

A strategy that you can apply, for example, is DCA (dollar cost averaging). Dollar cost averaging is a strategy where you invest a certain amount of money every so often in, in this case, Bitcoin. For example, you invest € 50 in Bitcoin every week. In this way you spread your risk over the volatile period, but it does not necessarily mean that you miss out on profits.

However, there is no best strategy. Any strategy could work and any strategy could go fatally wrong. It is therefore important at all times that you do your research well and only then invest . It is also highly recommended that you choose a strategy that you feel comfortable with.

Conclusion

So, a super cycle is one in which a price increase due to an increase in confidence only causes more price increase due to an increase in demand.

It is very difficult to recognize cycles in the crypto market as the market is very new. Everything we say about the course of certain cycles, or even supercycles, is therefore also pure speculation. Although it is based on what happened in the past, it should never be taken as financial advice.

It is therefore difficult to say anything about how to recognize a super cycle, and even more difficult to say something about how best to act in a super cycle. So it is always important that, as always, you learn first and then invest .

Do you want to know more about crypto cycles or just about Bitcoin, crypto or the blockchain? Join our EverythingAboutCrypto Facebook group! We like to talk about everything related to crypto and the blockchain and share valuable information with you. Hopefully we’ll see you there!

 

 

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