Are We in For a Bitcoin Super Cycle?

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  • A Bitcoin super cycle could be on the cards if the current levels of institutional adoption continue or grow
  • Bitcoin’s unique use case has been solidified in the past year, leading to billions of dollars’ worth being taken off the table
  • What are super cycles and what could it mean for Bitcoin?

The concept of a super cycle may sound like something used by moonbois to explain why their shitcoin is about to pump, but not only is it a well known phenomenon but it is also one that Bitcoin could genuinely be on the verge of entering. Bitcoin’s adoption as a hedge to depreciating fiat currencies has been unstoppable in the past 12 months, and it is this realization of its core use case that could drive a Bitcoin super cycle which would eliminate the typical boom and bust pattern.

Adoption and Demand is Key

A super cycle denotes a time when an asset or commodity enjoys a period of prolonged growth driven by demand, overcoming the typical short term market cycles to put in a longer, slower cycle. Bitcoin is of course famous for its volatile market cycles, but a Bitcoin super cycle would see the typical 80% correction replaced by steadier growth in line with increased demand and a reduction in the number of sellers.

The concept of a Bitcoin super cycle was first seriously mooted by Kraken’s Head of Business Development Dan Held in July last year. He further cemented his theory in a blog post at the end of last year. The theory goes that under normal circumstances Bitcoin would have been going through one of its usual four year cycles (on average) where it pumps for two years, tops out, and then spends the next two years retracing.

However, the coronavirus pandemic and the trillions of dollars, pounds, euros and more that have been printed worldwide to cope with it have solidified Bitcoin’s use case as a deflationary asset. This has been illustrated by the amount of institutions and hedge funds buying up Bitcoin for its actual use case and not just as a speculative asset. This could lead to an absence of the typical selloff and 80% correction and could instead lead to Bitcoin breaking the shackles of previous cycles and soaring to unimaginable heights.

Bitcoin Super Cycle Imminent?

This change in dynamic from a cyclical boom and bust to a steady growth (with fluctuations) would represent a Bitcoin super cycle, and would echo something seen with the likes of Apple and Amazon. These companies, among many others, endured huge fluctuations in their share price in their early days before they carved out their niche in the marketplace and the share price soared as investors realized the value in long term holding.

This is exactly what we’re seeing now, with institutions buying and pledging to hold bitcoin in order to hedge against what they see as a long-term erosion of the value of fiat currency. Should this narrative gain momentum, a Bitcoin super cycle would in fact be very much on the cards, with Held’s suggestion of a $1 million definitely viable in the future if the current trend continues.