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THE OTHER 4-YEAR BITCOIN CYCLES?

There is already a significant amount of analysis and discussion of the 4-year cycle associated with the supply schedule of #BTC baked into the #Bitcoin software code.

This is the reduction in new supply of BTC (the block subsidy) by 50% every 210,000 mined blocks (Fig. 1), what is referred to as the Bitcoin "halving". A new halving occurs roughly every 4 years (ie, 210,000 new BTC blocks are mined roughly every four years) and these will continue until the final halving at some point in the year 2140.

This diminishing supply of new BTC into the market, coupled with Bitcoin's fixed total supply (only 21 million BTC will ever exist) produce a supply/demand phenomenon which drives the price of BTC up over time relative to all other currencies. This is why the price of BTC compared to the CAD, USD, Euro and other currencies is always "up and to the right" over longer time frames (Fig. 2).

With the next Bitcoin halving just around the corner (est. April 19, 2024) there is a fresh wave of focus on the halving phenomenon and what the next reduction of BTC supply per block (from 6.25 BTC per block to 3.125 BTC per block) will bring.

The other side to this supply/demand equation is, of course, demand. The "up and to the right" dynamic requires demand to remain constant or increase relative to supply. The extent to which demand remains equal or grows over time, the price of BTC relative to other currencies will increase. That is a very simple description, of course, and there is further nuance. Nevertheless, this is the basic interplay between supply and demand.

So what about demand? Well, it's pretty clear from a scan of the global environment and the recent upward tick of BTC relative to all currencies around the world that demand continues to increase. Key features of this include the growing adoption of BTC in countries around the world where local currencies are experiencing rapid devaluation, as well as the ongoing introduction of new BTC purchasing mechanisms such as spot BTC Exchange Traded Funds (ETFs), most recently in the United States.

It dawned on me recently that the demand side of the equation may, in fact, have its own 4-year cycles, one "sociological" and another "individual/psychological".

The first has to do with the increased visibility and perceived credibility of Bitcoin as its price relative to other currencies continues to increase over time, and the second refers to the time it takes for individuals to undertake education about Bitcoin. These warrant further consideration.

As anyone who has become convinced of Bitcoin's value and importance will tell you, the educational journey is multi-faceted and ongoing. It's why we colloquially refer to it as going down the Bitcoin "rabbit hole".

The more you learn, the more you realize there is yet to learn. Each step down the rabbit hole reveals new steps to be taken...from learning about how the Bitcoin protocol functions, to learning about what money actually is, to learning about how global debt and financial markets operate, to learning about how energy markets operate, and so on.

The seemingly never-ending Bitcoin rabbit hole is why individuals and groups from such a vast diversity of backgrounds have been drawn to Bitcoin and why it is gradually (though not quickly enough) working its way into academic circles where, ostensibly, people have the time and mandate to study, study, study.

A great example of this is reflected in the forthcoming "Resistance Money: A Philosophical Case for Bitcoin" by philosophy professors @resistancemoney @rettlerb @craigwarmke. It's also why @SatoshiEducate was established and why student groups like @BTCStudents @CornellBitcoin are sprouting up in the same way that local Bitcoin circular economies have in recent years. We're just at the outset of this new wave of academic interest and adoption.

We've also seen new stakeholders and market mechanisms come into play over the past couple of years -- institutional adopters of BTC and tools like the Bitcoin ETFs.

All of the above could be considered part of a sociological 4-year demand cycle for Bitcoin. As the number continue to go up, as this thing simply refuses to die, and friends tell friends (so to speak), Bitcoin evolves sociologically.

Add to this the phenomenon of individual learning about Bitcoin, a journey from initiate to adept. Put otherwise, the time it takes to earn one's belts (white belt, green belt, and so on). That analogy may sound odd or even corny to people who still haven't even peered into the Bitcoin rabbit hole, but anyone who has spent time down the rabbit hole will tell you that it's quite apt.

The learning journey requires curiosity, humility and, along the way, a willingness to challenge conventional wisdom on many fronts. It almost always includes mistakes and course correction. All of this takes time, and it may be useful to consider this in terms of cycles as well. Perhaps another 4-year demand cycle, the individual/psychological cycle.

Now, a 4-year learning cycle may sound daunting to someone who is just beginning to learn about Bitcoin. It could be off-putting. I would say the following in response. Most of us who have been on the journey (me since 2019) fumbled into it. We didn't know we were on a journey until we were far enough down the rabbit hole to look up and appreciate it for what it is. We were simply following our noses and that little part of us that says "hmm, that's interesting" or "no, that can't be true, let me take a closer look", fearing not to place one foot after the other, and to continually submit ideas to interrogation.

Four years into the educational journey myself, I can honestly say that while it has been dis-orienting at moments, it has also been renewing and richly rewarding. The latter far outweighs the former. These themes are reflected in a couple of other pieces I've written recently, if you're interested:

Going Further Upstream on SDoH. A Call to Action.

x.com/ScottAWolfe/st…

Sojourns in the digital future

twitter.com/ScottAWolfe/st…

If you're just beginning to learn about Bitcoin, I would recommend just keeping your eyes on the next step, all the while recognizing that this time next year you will look back and be positively amazed. The beautiful thing is that there are now so many resources available (books, podcasts, conference, meetups and more). I marvel at what it must have been like 6, 10, 14 years ago to peer into the Bitcoin rabbit hole and follow one's nose forward.

If you have read this far, what do you think about the idea of there being these other 4-year Bitcoin cycles, on the demand side? Does that resonate? Does a 4-year timeframe just seem arbitrary?

These sociological and individual/psychological timeframes wouldn't pair exactly with each other nor the 4-year supply cycle. However, they might provide valuable conceptual and analytical frameworks. What do ya think? Thanks for reading!

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Figures 1 and 2

JG 1y ago

There's a couple of things I'm curious to see more with this cycle. The first is that although we're at another halving, most of the supply has already been issued, so I'm curious to see how the demand is the dominant factor in price appreciation going forward.

The other thing I'm kind of curious about, particularly since the approval of the US ETFs (noting of course we've had them in Canada a few years now) is how the broader narrative around Bitcoin switches from where it's viewed as largely a joke, scam, etc, to a point where most people no longer simply write it off as a passing fad or scam. I've seen this in a number of people I know that got into it in the past couple of years. One friend in particular told that me for a long time that he hated Bitcoin because he viewed it as eating into his other investments (particularly gold). He's since come around on it in a big way. I've also noticed another example of this wider acceptance - I was on another social media platform recently and saw an ad by TD for Bitcoin ETFs. I often, out of a bit of masochism, like to look at the comments because I get a kick out of how many times I see words like "tulips" or "Ponzi" - for me it's like a mental drinking game in a twisted sort of way. Even a year or two ago the comments in Bitcoin articles/ads would be littered with that sentiment. In the comments section of the particular recent ad I saw, these sorts of comments were few and far between - in fact many were constructive and some advocated for things like self-custody instead. In a lot of ways, these acceptance examples mirrors my own personal journey (although lucky for me, the personal acceptance happened a lot quicker). I really like your comment that the journey requires curiosity and humility. For me, I've always tried to be intellectually honest (definitely not always easy!), and that's really what this learning journey requires a lot of. This is a behavior that I try my best to model with others.

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