CryptoCurrency

Does Bitcoin’s Halving Cycle Have an effect on Market Psychology?

In the midst of all this good activity, where is bitcoin?
Businesses are giving the all clear, stocks are rising, and Ether is waking up ahead of the rumoured Merge. So where is Bitcoin in all of this good news? When it comes to reports of large institutions showing interest in cryptocurrency, no asset manager is more prominent than Blackrock, which just declared that it was collaborating with Coinbase to provide its institutional clients with access to a private bitcoin trust that would allow them to directly invest in the leading digital asset.

One of the prevailing narratives surrounding bitcoin for a number of years now is that establishments are on the way. This suggests that big investment firms will consider it essential to incorporate bitcoin allocation in their assets under management once bitcoin begins to gain traction as a recognised asset class. Furthermore, as bitcoiners like to say (also alluding to nation state adoption), retail FOMO may then start a snowball effect or turn into “game theory in action,” where no major buyer wants to be the last one on the board paying top dollar for its stack.

Furthermore, there is the correlation between bitcoin and equities, which was stronger than ever before the June crypto market crash, suggesting that bitcoin may be making a move towards mainstream finance. Regarding Ethereum, there is a lot of excitement and anticipation surrounding the Ethereum Merge, which will result in the adoption of a proof-of-stake protocol by the second-largest blockchain by market capitalization. This much-awaited event might potentially upend and energise the cryptocurrency sector, where positive sentiment raises all boats when it comes to blockchain technology.

The price of Ether has significantly increased in tandem with signs that the Merge will proceed in September.

All of which suggests that it would be reasonable to expect a spike in bitcoin prices, and indeed, there has been one. But considering the news of Blackrock and how much these headlines usually shake the market, the performance has not equaled that of equities or Ether and has not generally accorded with positive takes.

What Does This Suggest?
Is the public’s interest so low, the macro still so negative, and the bear phase so deep that bitcoin’s reaction to seemingly good news is noticeable but severely muted? This doesn’t seem to be entirely true, as the macro climate isn’t any worse than it was earlier in the year, the cryptocurrency space is moving past the major collapse of companies like Celsius and Three Arrows Capital, and some of the market’s anxiety has subsided. Thus, it’s possible that the folklore that has grown up around bitcoin’s well-researched four-year halving cycles could be another influence in the mix.

According to this body of knowledge, following its halvings, which happen around every four years, bitcoin experiences a parabolic rise. After that, it suffers a year or so of crashes and slumps alongside injured parties before starting to recover and lead to the next halving, and the cycle repeats itself. Although that pattern has stayed true thus far, it’s important to remember that there have only ever been three bitcoin halvings. During the first two of these (and possibly the third as well), bitcoin was still a relatively new asset that was extremely vulnerable to price swings.

But should we anticipate that this four-year trend will continue to exist forever? That seems excessive in light of the asset’s increasing weight and decreasing likelihood—contrary to critics’ dire predictions—of vanishing into tech obscurity and becoming the Esperanto of finance.

The four-year halving pattern will, however, only endure as long as enough individuals act in accordance with their belief that it will, which is contingent upon the pattern’s great persistence. This is known as crowd psychology.

We can see that while macro conditions are not fantastic right now, stocks are holding up and Ether is ignoring them.
The Bitcoin Case: Four-Year Cycle Trends vs. Market Hesitancy
In the case of bitcoin, is market reluctance primarily brought on by economic caution, or is it because the four-year cycle theory is so gravely observed and followed that every rally must be moderated while we wait for the designated season?
Changing Trends and Decoupling Cryptocurrencies
So far, the trend has been for bitcoin to lead and the rest of the cryptocurrency pack, including Ethereum, to trail after it, rising and then falling in a delayed, mirrored manner.
However, Ethereum maxis have long discussed a handful of crypto myths, such as the flippening—the moment when Ethereum’s market capitalization surpasses that of Bitcoin. Even while Ether currently seems agile and ready for takeoff, this has always felt like an implausible possibility.
What seems more plausible than a complete reverse of events is that Ethereum can decouple from the cycles of bitcoin and that the two become less correlated in terms of price movements, general sentiment, and expected functionalities (perhaps in Ethereum’s case as a tech platform rather than as a foreign currency).
Furthermore, if Ethereum and Bitcoin each decide to go their separate ways, then certain altcoins—much larger players with unique roles—may well follow suit and start acting as their own unique individual deserves.
Handling Correlations and Cycles
As of right now, bitcoin’s well-established cycles continue, and there is still a connection between bitcoin, ether, and other coins. However, if we look ahead to the rest of this decade, it seems likely that the characteristics of the current crypto market will disappear or be replaced because the blockchain industry is growing and leaving a big mainstream impact on the globe.
Bitcoin has always been criticised for being erratic, however this is untrue given that its cycles have been clear-cut and readable thus far. Perhaps we will always have to enjoy that cyclical readability while it lasts, since bitcoin’s halvings could not serve as such pivotal points on the cryptocurrency map for very long.

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