Disrupting Narratives: Is Bitcoin Bound For Longer Cycles With Diminishing Returns?

Reynaldo Marquez

Last Updated: June 11, 2024 7:19 am

3 mins read

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After one of Bitcoin’s worst drops in its history, many people wonder if the crypto market has reached a top. The market was hit by FUD after FUD, and it negatively impacted some holders. Many retail investors panic sold their coins. January 2018 flashbacks kicked in and suddenly there was talk of the start of a new bear market.

For months, the crypto space around Bitcoin has been dominated by bullish narratives of institutional adoption, BTC as a store of value stealing gold’s shine. “Up only” became something more than a meme, it was a conviction right until the moment when the prices broke below every critical support.

Despite its apparent sudden execution, BTC’s price crash was predicted by many experts able to read the signs and indicators that go beyond the narratives. Anonymous analyst “John Nash” has been studying this phenomenon for some time and came up with an interesting theory.

“Nash” reviewed BTC’s previous cycle to counter “moonboism”, a made-up condition suffered by those investors with an everlasting “Up Only” sentiment. As the chart below shows, every BTC since 2021 shared a characteristic: they tend to be longer than its predecessor and offer less return on investment (ROI).

Bitcoin’s first cycle began in 2011 with an 8-month duration. During this period, BTC’s price went from below $1 to around $10. The second cycle started somewhere in 2013 and lasted for about 7 months with 2 different peaks at the end of that year and in 2014.

Bitcoin’s third cycle has been the longest, so far, with a 35-month duration. The current cycle has extended for 28 months, the analyst said:

Cycles clearly lengthen, ROI clear diminishes (the law of diminish returns). Whoever still believes in 4-year cycle and constant ROI is clearly in denial/delusion.

Beware Of Bitcoin’s Price Narratives

From the chart presented by the analyst, he presents 3 possible scenarios. A peak of the current cycle by summer 2022, an extension of the cycle until October 2022, if it follows the same length as the previous cycle.

Finally, the least likely scenario and the most optimistic is a peak of the cycle by December 2021. It is possible to assume, based on the previous argument, that the shorter the cycle, the more explosive the ROI. So, if this scenario plays out BTC could see massive gains.

In a separate post, the analyst warns investors about narratives, this can be powerful to drive new users, but equally dangerous if blindly follow. Based on Metcalfe’s law, used to describe the curve of adoption of new technology, “Nash” made the following conclusion:

During the past decade Bitcoin has been following adoption curve/Metcalfe’s law more or less steadily, however, with one peculiar property. Since Bitcoin’s network growth is directly expressed in monetary value it is prone to speculative episodes i.e. bubbles.

Using a logarithmic growth curve (LGC) is possible to determine BTC’s true bottom and top, the moment when the curve will start to flatten and fewer users will enter the network. This will be accompanied by more maturity (time) and less volatility for BTC’s price.

The analyst rejects models that predict a BTC price appreciating to infinity, he believes that no Bitcoin cycle outperforms its previous overextension.

In other words, it is less likely for BTC to reach an all-time high price if the grown expressed in percentage is higher than in 2017. At the time, BTC went from $1,000 to $20,000 increasing by 1,900%. Then, for the cryptocurrency to rise from $10,000 to $100,000 in this cycle would represent a 900% increase. A plausible price according to this theory.

BTC trades at $36,112 with losses in all time frames. The monthly chart has been the most affected with a 37.3% loss, at the time of writing.

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

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