Arthur Hayes on the Real Dynamics of Bitcoin Cycles

By: Eliza Bennet

The discussion about Bitcoin's cyclical nature has been revitalized by Arthur Hayes, co-founder of BitMEX, who contends that the traditional four-year cycle guiding Bitcoin's market is no longer relevant. Hayes posits that the cycle, once strictly tied to Bitcoin's halving events, is now overshadowed by macroeconomic liquidity dynamics, primarily influenced by policy choices in global economic powerhouses like the United States and China.

According to Hayes, the outdated model of predicting Bitcoin’s market movements based on its four-year halving cycle fails to factor in the substantial impact of monetary policy. In his recent analytical blog post titled “Long Live the King”, he articulates that the quantity and cost of money are the dominant factors influencing Bitcoin's price movements. The liquidity injected into markets, particularly in the form of U.S. dollar supply and the subtle shifts in Chinese yuan availability, has started dictating the bullish or bearish trends in crypto markets.

Historically, different phases of Bitcoin price movements have coincided with global financial policy and liquidity. For instance, Hayes recalls the ‘Genesis Cycle’ from 2009 to 2013, fueled by quantitative easing post-global financial crisis and a flourish in Chinese credit. Similarly, the ‘ICO Cycle’ of 2013 to 2017 was steeped heavily in yuan liquidity until policy changes both in China and the U.S. triggered its end. This analysis places significant emphasis on macroeconomic conditions rather than just the programmed supply shocks of Bitcoin halvings, marking a shift in understanding Bitcoin dynamics.

In the current era that Hayes dubs as the ‘New World Order’, the adaptability and actions of monetary authorities in Washington and Beijing are seen as pivotal. The liquidity strategies that have positioned markets for accelerated growth, such as U.S. interest rate policies and China’s pragmatic economic interventions, offer the latest proof supporting Hayes' hypothesis. With this backdrop, Bitcoin's continuing rise becomes less a product of its cyclical halving and more a reflection of shifting global monetary tides and strategic economic policies aimed at maintaining liquidity. These developments suggest that Bitcoin, often labeled as digital gold, advances as a barometer for broader economic strategies and influences.