BitMEX co-founder Arthur Hayes stated that the 4-year crypto cycle really no longer works — but according to him, the reason is not the one usually mentioned.
“As the fourth anniversary of the current cycle approaches, traders are trying to use the old model again and predict the end of the bull market,” he wrote in a blog on Thursday.
In Hayes’ opinion, although this scheme worked before, now it is no longer applicable and “this time it will fail.”
He believes that Bitcoin cycles are not formed depending on halvings or calendar intervals, and not even directly because of institutional interest, but under the influence of money supply — primarily in US dollars and Chinese yuan.
“Past cycles ended when monetary policy tightened, not because some timer expired,” Hayes explained.
This cycle is different from previous ones
According to Hayes, the current market is different for a number of reasons. First, the US Treasury injected about $2.5 trillion, withdrawn from the Fed’s reverse REPO program, into the market by issuing more and more short-term bonds. Second, Donald Trump, according to Hayes, is aiming for an “overheating” strategy — a stimulative monetary policy to literally “grow out of debt.”
At the same time, there are discussions about deregulating banks to make them lend more actively.
Moreover, despite high inflation, the Fed has already returned to lowering rates. According to the futures market CME, there is a 94% probability that the rate will be lowered again in October, and an 80% chance in December. In total, two more cuts are expected before the end of the year.
It all comes down to the US and China printing presses
In Hayes’ opinion, real Bitcoin bull cycles have always been linked not to halvings, but to periods of active money printing in the US and China.
The first Bitcoin rally coincided with the Fed’s quantitative easing program and the expansion of lending in China. It all ended at the end of 2013, when both countries began tightening policy.
The second, so-called “ICO cycle,” was started by China, not the US. In 2015, the yuan was under pressure, lending expanded sharply, and this fueled the market. But as soon as growth rates slowed and dollar liquidity began to shrink, the cycle collapsed.
The third cycle, associated with COVID-19, was almost entirely about the dollar. China, meanwhile, behaved cautiously. Bitcoin began to rise on a wave of dollar liquidity, but it all ended as soon as the Fed started tightening at the end of 2021.
China won’t kill the current cycle
Hayes believes that although China will not be the main driver of the rally this time, as in previous cycles, it is no longer hindering growth. Policymakers are no longer focused on shrinking liquidity — now the goal has shifted to fighting deflation.
Such a shift, from deflationary pressure to a neutral or even mildly stimulative policy, removes the key brake that could crash the market. This, according to Hayes, allows the US to continue pumping liquidity into the system without a Chinese “headwind.”
“Listen to our monetary authorities in Washington and Beijing. They openly say: there will be more money and it will be cheaper. That’s why Bitcoin is rising in anticipation of exactly such — quite likely — a future. The king is dead, long live the king!”
When the pressure becomes too strong, China still turns on the printing press. Source: Arthur Hayes
Many still believe in the 4-year cycle
Despite Hayes’ arguments, the idea of the classic four-year cycle is still alive. In August, Glassnode analysts wrote that “in terms of cyclicality, Bitcoin’s price movement still resembles previous patterns.”
A similar opinion was voiced by Saad Ahmed, head of Asia-Pacific at the crypto exchange Gemini. In a recent interview, he said:
“When it comes to the four-year cycle, the reality is that we are likely to continue to see some form of cyclicality.”
