Are We in a Bitcoin Supercycle?

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Last updated on November 26, 2021 Comments: 4

The meteoric rise in the price of Bitcoin seems to have no end in sight. Many financial experts predicting that Bitcoin will hit $100,000 this year, and others see it eventually going as high as $1 million.

What’s behind the price surge in Bitcoin and cryptocurrency and is it sustainable? Many believe we’re actually in the middle of a Bitcoin supercycle. This is an exciting time to be an investor in cryptocurrency, but you should have an understanding of what’s going on before you jump in.

What is a Supercycle?

A supercycle is a phenomenon where the bullish increase in the price of a market security causes its price to increase further.

Think of it as a positive feedback loop: people become interested in an investment so they start buying it, which drives up the price, and that makes more people confident about it and encourages them to buy more so the price goes up further, and so on.

Typically, the term ‘supercycle’ is used to refer to a decades-long bullish run of commodities, but lately many financial analysts have been applying the term to Bitcoin. Bitcoin has been incredibly popular over the past decade, but especially so since the COVID19 pandemic in 2020.

What’s Going on With Bitcoin?

Bitcoin has entered a new stage of mainstream acceptance. Now more than ever, it’s seen as a legitimate investment that can deliver real value. Bitcoin is gradually becoming less of a speculative investment and more of a form of asset storage. Just as you diversify your portfolio across different financial securities and different currencies, you should consider diversifying into cryptocurrency.

Bitcoin is only growing in accessibility, acceptance, and utility. More e-commerce stores are adding cryptocurrency as an acceptable form of payment, and there are constantly more ways to spend your Bitcoin, such as with cards that work at brick-and-mortar stores. Recently the first Bitcoin ETF was approved in Canada, making Bitcoin accessible to investors on the traditional stock exchange.

The ever-increasing interest and investment in Bitcoin is driving its price higher. Furthermore, because it seems that more and more investors will be jumping on the Bitcoin bandwagon, we can expect its price to continue to go up. This exactly why many are saying we’re in the middle of a Bitcoin supercycle!

How COVID Legitimized Bitcoin

The COVID-19 pandemic has hit everyone hard, but Bitcoin seems to be the exception. A global crisis that tanked the traditional stock market and brought the global economy to a standstill only served to showcase exactly how powerful cryptocurrency is. Where do you put your money when the world economy is in turmoil? The answer is in an asset that’s free from cumbersome political and geographical hang-ups.

Bitcoin and cryptocurrency, in general, is one of the most useful ways to diversify your investments and store cash, because it’s not tied to one country or currency. Bitcoin is the ultimate global asset and is being heralded as the “Gold 2.0” on which the rest of our monetary system is based.

Bitcoin Price Predictions

Bitcoin traded under $1 per coin from 2009 to 2011. In 2013, it peaked at $1,242 only to crash back down to between $300 to $600 for the majority of the following 4 years. In 2017, we saw the first big run-up of Bitcoin, peaking at over $18,000 in December of that year. It experienced another pullback before getting pushed to a new high in 2020 and it’s continued its climb ever since. Bitcoin is now valued at over $58,000 USD and still headed higher.

The Winklevoss twins have been bullish on crypto since the beginning and insist it’s going to $500,000. More modest estimates peg it at $200,000 to $250,000 for 2021, and others still insist it will eventually hit $1 million. Only time will tell who is right, but the general consensus is that Bitcoin is going to continue to go up for the foreseeable future.

Are We Currently in a Bitcoin Supercycle?

Bitcoin Supercycle Phases

ImageSource: Shutterstock

It’s been around since 2009, but Bitcoin is still a very new financial security with a relatively short price history. Because of this, it’s difficult to reliably assess patterns in Bitcoin’s price movements. Nevertheless, there is some evidence that we are in the middle of a Bitcoin supercycle.

Bitcoin’s market cycle appears to be about 4 years long, consisting of a run-up followed by a dramatic pull-back. This market cycle is centred around Bitcoin halving events which happen approximately every 4 years. A “halving event” is when the reward of mining new Bitcoin blocks drops by 50%. This will continue until all 21 million Bitcoins are mined. We just completed one of these halving events in 2020, which means we are again at the beginning of another 4-year Bitcoin market cycle.

The Bitcoin market cycle consists of four distinct phases: accumulation, continuation, parabolic, and correction. Here’s a breakdown of each:

Accumulation phase

As you may guess from the name, this is when investors accumulate Bitcoin. This phase happened at Bitcoin’s launch, and also occurs following the phase of the Bitcoin market cycle, the correction phase. The accumulation phase is the best time to buy Bitcoin in order to maximize overall returns.

Continuation Phase

As investors accumulate Bitcoin, the price gets pushed higher until it enters its continuation phase. The Bitcoin halving events occur in the continuation phase, spurring a new wave of accumulation that kicks off the parabolic phase.

Parabolic Phase

The parabolic phase is marked by Bitcoin hitting all-new highs in price. Many investors will capture profits, selling partial or all of their holdings, which can result in significant price corrections. This phase is marked by extreme volatility!

Correction Phase

After all the excitement of the parabolic phase, Bitcoin is due for a correction. Historically Bitcoin has seen an average 80% price drop during the correction phase, so when this hits, expect it to hurt.

Where Are We Now?

We are now in the parabolic phase of the Bitcoin market cycle which is always defined by extreme volatility and investor euphoria. It’s an exciting and profitable time to invest! The parabolic phase will be followed by a correction phase, in which we will see a dramatic pullback in Bitcoin’s price. However, there’s no way of knowing yet what all-time high Bitcoin will hit before the pullback phase begins.

Given the growing interest in Bitcoin by institutional and retail investors alike, as well as the increase in the availability of products and platforms to invest in Bitcoin, all signs point to the price continuing to go up. No matter what, 2021 will be a very exciting time to invest in Bitcoin.

How to Invest During a Bitcoin Supercycle

When it comes to investing in a supercycle, the sooner you get in, the better. The very nature of a supercycle is continuous bullish price movement, which means you’re likely to see your investment continue to go up.

If you’re not already investing in Bitcoin, now is the time to start. You can begin with as little cash as you can spare, and use a trading app to purchase Bitcoin and other cryptocurrencies right on your mobile device. You have no excuse to stay on the sidelines anymore!

Mogo Bitcoin & Rewards is a cryptocurrency exchange platform that allows you to easily buy and sell Bitcoin. Mogo allows users to invest directly in Bitcoin with no annual account fees. You can buy and sell Bitcoin directly from the Mogo app. Setting up an account is fast and easy, and you can trade Bitcoin at any time.

Wealthsimple Crypto also offers one of the best and easiest to use platforms for buying cryptocurrency. There’s no minimum balance required to open an account, and you can invest in both Bitcoin and Ethereum. If you’re already a Wealthsimple Trade user, you’ll find it super simple to toggle between the traditional stock market and the cryptocurrency exchange platform.

When it comes to investing in Bitcoin during a supercycle, the same strategy that works for all your investments is applicable here: invest small amounts that you can afford on a consistent basis. Putting $100 into Bitcoin every week or two is more than enough to enjoy the rewards of investing in cryptocurrency without breaking the bank.

Is the End of a Supercycle a Super Crash?

You might be thinking the only possible end to a Bitcoin supercycle is a dramatic pullback, but it’s becoming increasingly less likely we will see the same dramatic dips characteristic of Bitcoin in the past. While it’s likely we’ll see many dramatic dips of 20% (or more) in Bitcoin’s price, its general trend will continue upward for 2021.

In the coming months and years, expect to see Bitcoin increasingly accepted at your favourite stores, and more readily available as an investment product at your bank or brokerage. You may be paying for your morning takeout coffee with Bitcoin by the end of the year!

We will be due for a price correction at the end of the parabolic phase of the Bitcoin market cycle, but that seems to be a ways away yet. And when it does happen, it’s really just a time to buy more.

What Does This Mean for the Canadian Investor?

Bitcoin and cryptocurrency are here to stay, and if you don’t add some to your portfolio you run the risk of being left behind. But don’t forget to balance your hopes and dreams with your tolerance for risk! Now is not the time to move all of your money out of traditional investments like stocks and bonds and into cryptocurrency. But it is a great time to start investing in Bitcoin and enjoy a great upside over the long term.

 

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Author Bio

Bridget Casey
Bridget Casey is the award-winning entrepreneur behind Money After Graduation, a Canadian financial literacy website aimed at 20 and 30-somethings. She holds a BSc. from the University of Alberta, and an MBA in Finance from the University of Calgary. She has been featured as a millennial financial expert by Yahoo! Finance, TIME Magazine, Business Insider, CBC and BNN. Bridget was recognized as one of Alberta's Top Young Innovators in 2016.

Article comments

4 comments
Tim Eveland says:

Although you may not have predicted Bitcoin’s crash in mid 2021 I agree that the super cycle is every 4 years and we will continue to see a bear market for many months until the bull run returns, perhaps in late 2024-ish. It’s sad that only a small portion of investors are aware of this cycle and therefore can’t take advantage of it. They look at Bitcoin’s crash right now as something unexpected meanwhile experts took their profits back when Bitcoin was at $60,000 this year. The best thing to do now is to dollar cost average your way in to a diverse crypto portfolio during the bear market so that when the next bull run strikes 4 years from now we could be laughing with 3,000% profits or more.

Daniel from GreedyRates says:

Hi Tim,
It’s true, the everyday investor might not be able to take advantage of the current Bitcoin downturn. While not everyone will be able to take advantage like you might, dollar cost averaging your way to a diverse portfolio is certainly a sound approach as long as it fits with your risk appetite. Good crypto fortune to you!

Crypto guy says:

That isn’t what is meant by a super cycle on Bitcoin terms. That is simply the 4 year halvening cycle which has happened since conception.

In this context a super cycle is a longer, more drawn out cycle the normal which would push it higher for longer than previous ones.

Daniel from GreedyRates says:

Hi Crypto Guy,
Definitely interested to see how long crypto can stay on the rise in spite of anyone who may or may not fall out of love with crypto.