Since its launch approximately 12 years ago, Bitcoin (BTC) has seen a number of bull and bear cycles, each greater than the last. What drives these cycles, however? Decred co-founder Jake Yocom-Piatt claims that the answer lies within the human brain.
“Bitcoin’s bull and bear cycles are functions of generic human psychology, attention spans, and its deterministic and diminishing issuance,” Yocom-Piatt told Cointelegraph.
Over the years, various parties have argued different cases for Bitcoin’s cycles, including PlanB’s stock-to-flow model, which projects future Bitcoin prices based on its programmed halving events every four years.
Bitcoin is unlike any asset before it. Its programmed finite supply and ease of movement allow for borderless value storage.
One might wonder though, whether Bitcoin’s nature as a programmed asset dictates its price cycles on some level, especially since its mining reward cuts in half every four years, essentially putting fewer Bitcoin on the market each time a block is mined. Its ultimate 21 million supply cap may also factor into the equation.
“The rate of supply of Bitcoin is constantly shrinking as a percentage of the total circulation, with the addition of a substantial supply shock every halvening,” Yocom-Piatt explained.
“Bull runs occur when demand begins to outstrip supply, driving up the price, which gets the attention of myopic investors. After a certain amount of time, these myopic investors’ attention span for a bull market fades, and we revert to a bear market. With each bull market, the overall awareness of Bitcoin grows, sowing the seeds for the next bull run.”
This post first appeared here: https://cointelegraph.com/news/decred-co-founder-explains-rationale-behind-bitcoin-bull-and-bear-cycles