Bitcoin's 4-year cycle is a widely acknowledged concept in the cryptocurrency world, but have you ever pondered the possibility of a larger cycle at play? This larger cycle could potentially mirror the human adoption of groundbreaking technologies such as the internet. This article delves into a fresh theory suggesting that Bitcoin is traversing a larger 16-year cycle that could help us forecast the trajectory of Bitcoin's price in the upcoming years.
The Standard 4-Year Cycle
Bitcoin typically follows a 4-year cycle, bifurcated into two parts: the uptrend and the downtrend. A standard 4-year cycle features a 3-year uptrend, followed by a 1-year downtrend, also recognized as a bear market. Bitcoin's previous 4-year cycles have demonstrated astonishing precision, captivating the attention of market participants.
The Dotcom Phenomenon
The parallels between the market structure of the S&P500 during the Dotcom bubble and the Bitcoin cycle are hard to ignore. Traditional financial markets also experienced distinct 4-year cycles. The Dotcom era arguably started around 1986 with Microsoft going public. The first three 4-year Bitcoin cycles bear a striking resemblance to the S&P500's initial three 4-year cycles post-1986.
Both periods represent the adoption of transformative technology that revolutionized the way society processes and utilizes information. The advent of personal computers and the internet drastically altered our lives. It's plausible to predict a similar trajectory for Bitcoin adoption in the future.
Can the Dotcom cycle structure help us envisage a potential path for Bitcoin? Market cycles, in my view, are among the best methods for rough price predictions and determining entry and exit points in a market. However, it's important to stress that these are approximations. Although history doesn't exactly repeat itself, it often rhymes, and this holds true for financial cycles.
Microsoft and Bitcoin: A Comparative Study
Microsoft followed a comparable path. It started with three right-translated 4-year cycles, followed by a left-translated 4-year cycle, indicating a prolonged bear market. Microsoft hit its peak price around 2000, marking a long-term high at approximately $60. It took the company 15 years to completely recover and surpass that level again. This period extends to 21 years if we account for the money supply.
Both Microsoft and the S&P500 charts vividly illustrate the severity of a correction following a prolonged bull-market. It's challenging to envisage a prolonged bear market for an asset that has been on an upward trend. Could we anticipate a similar scenario for Bitcoin?
Confluence of Cycles
Let's examine what these cycles predict for Bitcoin and how we could potentially prepare for these outcomes. It's intriguing to observe that one date forecasts the same outcome in both the typical 4-year cycle and the 16-year cycle.
A typical 4-year cycle would suggest an uptrend until 2025, followed by a 1-year decline. This is a pattern we've observed thrice in Bitcoin's history. The 16-year cycle suggests that we may follow a path similar to the Dotcom bubble, with Bitcoin peaking by the end of 2024 and a multi-year-long decline ensuing.
Identifying a Market Top
Bitcoin funding rates are among the most accurate indicators a Bitcoin trader can use. These rates indicate whether the majority of market participants on derivative markets are shorting or longing Bitcoin. This metric can help spot the market conditions and if there have been any changes. For instance, one of the first signs of Bitcoin entering a bear market in 2022 was a decline in Bitcoin prices with negative funding rates, a rarity in a healthy bull market.
Another way to identify a cycle top is by timing. If Bitcoin is in the topping period of the 16-year cycle and we see a break below a swing-low, the chances of a cycle top increase. This would then be invalidated by breaking back above that specific level.
Other Influencing Factors
There are other factors that impact Bitcoin's price apart from these cycles. For instance, the Federal Reserve's decision to print substantial amounts of money in 2020 led many investors to seek safe havens like the financial markets and Bitcoin. It's quite evident that the moment the Federal Reserve started to pump money into the economy, Bitcoin and the financial markets began to rise, until the money printer halted in 2022 and Bitcoin entered a 1-year decline phase. These fundamental changes in the economy will likely impact Bitcoin and the way these cycles unravel.
Frequently Asked Questions
How much should I contribute to my Roth IRA account?
Roth IRAs let you save tax on retirement by allowing you to deposit your own money. You cannot withdraw funds from these accounts until you reach 59 1/2. There are some rules that you need to keep in mind if you want to withdraw funds from these accounts before you reach 59 1/2. You cannot touch your principal (the amount you originally deposited). You cannot withdraw more than the original amount you contributed. You must pay taxes on the difference if you want to take out more than what you initially contributed.
The second rule says that you cannot withdraw your earnings without paying income tax. Also, taxes will be due on any earnings you take. Let's take, for example, $5,000 in annual Roth IRA contributions. Let's further assume you earn $10,000 annually after contributing. This would mean that you would have to pay $3,500 in federal income tax. You would have $6,500 less. This is the maximum amount you can withdraw because you are limited to what you initially contributed.
The $4,000 you take out of your earnings would be subject to taxes. You'd still owe $1,500 in taxes. Additionally, half of your earnings would be lost because they will be taxed at 50% (half the 40%). Even though you had $7,000 in your Roth IRA account, you only received $4,000.
There are two types: Roth IRAs that are traditional and Roth. Traditional IRAs allow for pre-tax deductions from your taxable earnings. When you retire, you can use your traditional IRA to withdraw your contribution balance plus interest. You can withdraw as much as you want from a traditional IRA.
Roth IRAs don't allow you deduct contributions. Once you are retired, however, you may withdraw all of your contributions plus accrued interest. Unlike a traditional IRA, there is no minimum withdrawal requirement. Your contribution can be withdrawn at any age, not just when you reach 70 1/2.
Is gold buying a good retirement option?
Although gold investment may not seem appealing at first glance due to the high average global gold consumption, it's worth considering.
The best form of investing is physical bullion, which is the most widely used. There are other ways to invest gold. It's best to thoroughly research all options before you make a decision.
For example, purchasing shares of companies that extract gold or mining equipment might be a better option if you aren't looking for a safe place to store your wealth. If you need cash flow from an investment, purchasing gold stocks is a good choice.
ETFs are an exchange-traded investment that allows you to gain exposure to the market for gold. You hold gold-related securities and not actual gold. These ETFs often include stocks of gold miners, precious metals refiners, and commodity trading companies.
Is gold a good investment IRA option?
For anyone who wants to save some money, gold can be a good investment. It can be used to diversify your portfolio. There's more to gold that meets the eye.
It's been used as a form of payment throughout history. It is often called “the oldest currency in the world.”
But gold is mined from the earth, unlike paper currencies that governments create. It is very valuable, as it is rare and hard to create.
The price of gold fluctuates based on supply and demand. The strength of the economy means people spend more, and so, there is less demand for gold. This results in gold prices rising.
On the flip side, when the economy slows down, people hoard cash instead of spending it. This leads to more gold being produced which decreases its value.
This is why investing in gold makes sense for individuals and businesses. You will benefit from economic growth if you invest in gold.
You'll also earn interest on your investments, which helps you grow your wealth. Additionally, you won't lose cash if the gold price falls.
What is the best way to hold physical gold?
Gold is money and not just paper currency. It is an asset that people have used over thousands of years as money, and a way to protect wealth from inflation and economic uncertainties. Investors today use gold to diversify their portfolios because gold is more resilient to financial turmoil.
Many Americans are now more inclined to invest in precious metals like gold and silver than stocks or bonds. Although owning gold does not guarantee that you will make money investing in it, there are many reasons to consider adding gold into your retirement portfolio.
One reason is that gold has historically performed better than other assets during periods of financial panic. Gold prices rose nearly 100 percent between August 2011 and early 2013, while the S&P 500 fell 21 percent over the same period. During these turbulent market times, gold was among few assets that outperformed the stocks.
The best thing about gold investing is the fact that there's virtually no counterparty risk. Your shares will still be yours even if your stock portfolio drops. You can still own your gold even if the company where you invested fails to pay its debt.
Finally, the liquidity that gold provides is unmatched. This means that, unlike most other investments, you can sell your gold anytime without worrying about finding another buyer. The liquidity of gold makes it a good investment. This allows you to take advantage of short-term fluctuations in the gold market.
Statistics
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
External Links
law.cornell.edu
- 7 U.S. Code SS7 – Designation of boards for trade as contract markets
- 26 U.S. Code SS 408 – Individual retirement accounts
irs.gov
bbb.org
cftc.gov
How To
A rising trend in gold IRAs
As investors seek to diversify their portfolios while protecting themselves from inflation, the trend towards gold IRAs is on the rise.
Gold IRA owners can now invest in physical gold bullion or bars. It can be used as a tax-free way to grow and it is an alternative investment option for people who are not comfortable with stocks or bonds.
An investor can use a gold IRA to manage their assets and not worry about market volatility. They can use the gold IRA to protect themselves against inflation and other potential problems.
Investors also have the benefit of physical gold, which has unique properties such durability, portability and divisibility.
Additionally, the gold IRA has many benefits. It allows you to quickly transfer your gold ownership to your heirs. The IRS doesn't consider gold a commodity or currency.
Investors looking for financial security are increasingly turning to the gold IRA.
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By: Jeroen van Lange
Title: Unraveling Bitcoin's 16-Year Cycle and Its Parallels with the Dotcom Bubble
Sourced From: bitcoinmagazine.com/markets/the-bitcoin-16-year-cycle-and-its-correlation-to-the-internet-bubble
Published Date: Tue, 10 Oct 2023 14:08:41 GMT
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