BitMEX co-founder Arthur Hayes argued Bitcoin cycles are driven by monetary policy rather than timing, and something’s very different this time around.
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BitMEX co-founder Arthur Hayes has agreed that the four-year crypto cycle is dead, but not for the reasons most people believe.
“As the four-year anniversary of this fourth cycle is upon us, traders wish to apply the historical pattern and forecast an end to this bull run,” said Hayes in a blog post on Thursday.
He added that while the four-year pattern worked in the past, it is no longer applicable and “will fail this time.”
argued that Bitcoin () price cycles are driven by the supply and quantity of money, primarily USD and the Chinese yuan, rather than arbitrary four-year patterns linked to , or as a direct result of institutional interest in crypto.
Past cycles ended when monetary conditions tightened, not because of timing, Hayes said.
The current cycle is different
Hayes argues the cycle is different for several reasons, including the US Treasury draining $2.5 trillion from the Fed’s Reverse Repo program into the markets by issuing more Treasury bills and US President Donald Trump wanting to “run it hot” with to grow out of debt.
There are also plans to deregulate banks to increase lending.
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Additionally, the US central bank has resumed rate cuts despite inflation being above its target. Two more rate cuts are predicted this year, with 94% odds on an October cut and 80% odds on another one in December, to CME futures markets.
It’s all about Chinese and US money printing
Bitcoin’s first bull run coincided with Federal Reserve quantitative easing and Chinese credit expansion, ending when both the Fed and Chinese central bank slowed money printing in late 2013.
The second “ICO cycle” was driven primarily by the yuan credit explosion and currency devaluation in 2015, not the USD. The bull market collapsed as Chinese credit growth decelerated and dollar conditions tightened, he said.
During the third “[COVID-19] cycle,” Bitcoin surged on USD liquidity alone while China stayed relatively restrained. It ended when the Fed began tightening in late 2021, Hayes explained.
China won’t kill the cycle this time
Hayes argued that while won’t fuel this rally as much as it did in previous cycles, policymakers are moving to “end deflation” rather than continuing to drain liquidity.
This shift from a deflationary headwind to at least neutral, or mildly supportive monetary policy, removes a major obstacle that would have killed the cycle, allowing US monetary expansion to drive Bitcoin higher without Chinese deflation counteracting it, he said.
“Listen to our monetary masters in Washington and Beijing. They clearly state that money shall be cheaper and more plentiful. Therefore, Bitcoin continues to rise in anticipation of this highly probable future. The king is dead, long live the king!”
Many still believe in the four-year cycle
Onchain analytics firm Glassnode in August that “from a cyclical perspective, Bitcoin’s price action also echoes prior patterns.”
“I think when it comes to the four-year cycle, the reality is that it’s very likely that we’ll continue to see some form of a cycle,” crypto exchange Gemini’s head of APAC region, Saad Ahmed, Cointelegraph earlier this month.
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