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This Bitcoin (BTC) Cycle Is Different: Here Are 5 Reasons Why

5 mins
Updated by Ryan James
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In Brief

  • Renowned analyst and trader @caprioleio posted on X 5 reasons why he believes this Bitcoin cycle is different from others.
  • Among the most important are the record hash rate generated during the bear market, the percentage of BTC in the hands of long-term hodlers and the growth of the Lightning Network.
  • Also unprecedented is the size of global adoption in both the government Bitcoin mining sector and the scale of companies open to cryptocurrency payments.
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The cyclic nature of Bitcoin (BTC) is the subject of much discussion and analysis. The 4-year cycle dictated by the BTC halving event seems to be the dominant narrative in the cryptocurrency sector.

Especially since historical price action and investor sentiment have tended to follow a pattern: 2 years of increases, 1 year of decreases, and 1 year of accumulation.

However, despite recognizing the importance of rhyming history and the fundamental significance of successive halving, some analysts are trying to highlight the differences.

The latest calculation of what makes the current cycle of Bitcoin and other cryptocurrencies different from previous ones was presented on X by @caprioleio. In the article below, we outline the special features of this cycle and events that have never happened before:

  1. Hash rate breaks all-time highs (ATH) during bear market
  2. Supply in the hands of long-term hodlers (LTH) reaches an all-time high of 76.2%
  3. Governments in many countries are mining BTC
  4. Lightning Network reaches over $150 million
  5. BTC adoption reaches unprecedented levels, and more and more companies accept cryptocurrency payments

Bitcoin’s Hash Rate Continuously Breaks ATH During Bear Market

The first phenomenon that @caprioleio points out is Bitcoin’s hash rate. This fundamental network indicator estimates the number of hashes per second mined by network miners. The higher the value it represents, the fundamentally stronger and more secure the network is, and the more computing power is involved in mining BTC.

According to a chart the analyst published in another post on X, Bitcoin’s hash rate “is currently insane.” Just compare the current values when BTC is struggling at the $30,000 level, with hash rate readings from the all-time high of $69,000 in November 2021.

Today, the Bitcoin network has about 3x the hash rate it had when ATH was reached.

Bitcoin's hash rate is 3x higher than during ATH
Bitcoin’s hash rate is 3x higher than during ATH / Source: X

The analyst stresses that usually, during a bear market, the hash rate drops or rises slowly. Currently, the growth of Bitcoin’s network power is exponential. He concludes:

“This is a step change in mining industrialization. Energy companies & governments are here.”

Supply in the Hands of LTH Reaches ATH

The second factor for which this Bitcoin cycle is unique is the faith and behavior of long-term hodlers (LTH). In a separate post, @caprioleio points out that this important on-chain indicator broke through its historic all-time high in mid-2015.

During the bear market 2 cycles ago, supply in the hands of LTH reached around 75%.

This record has been broken, with long-term hodlers owning as much as 76.2% of BTC supply in circulation. This indicates unprecedented confidence in Bitcoin’s potential for further increases and the long-term outlook of most market participants. The analyst adds:

“Less liquid supply means the same people are bidding on less coins. You do the math.”

Record supply of BTC in the hands of LTH
Record supply of BTC in the hands of LTH / Source: X

Governments of Many Countries Are Mining BTC

Another argument concerns the mining of Bitcoin by government institutions in many countries. Indeed, this revolution was not present in earlier market cycles, when the burden of mining rested on the shoulders of private institutions or individual miners.

The entry of government institutions into the Bitcoin and cryptocurrency mining market not only multiplies the potential money involved. It also helps legitimize cryptocurrency mining as a viable and legitimate business on which states can base their long-term economic and financial strategy.

Here are examples of some countries where governments are involved in Bitcoin mining:

  • El Salvador: Following the adoption of Bitcoin as legal tender in El Salvador, the government has declared its intention to start BTC mining operations, including using volcanic energy.
  • Iran: The Iranian government has authorized cryptocurrency mining and may be involved in this activity in various ways, including supporting mining companies.
  • Venezuela: The Venezuelan government has openly invested in cryptocurrency mining, particularly in the case of the Petro cryptocurrency, which was created and supported by the Venezuelan state.
  • Russia: There are reports of Russian state institutions being involved in cryptocurrency mining.
  • Kazakhstan: The Kazakh government is known to favor the development of blockchain technology and cryptocurrencies, which include mining.
  • Bhutan: The tiny kingdom of Bhutan owns and mines quite a bit of BTC. According to recent reports, the country may account for as much as 1% of the network’s total computing power.

Lightning Network Reaches Over $150 Million

The growth of the Lightning Network (LN), or Layer 2 of the Bitcoin network, in recent years has been astounding. BeInCrypto reports that LN transactions have increased by more than 1,200% over the past two years.

Moreover, this development came despite a bear market and a deep 77% drop in Bitcoin price, counting from the ATH to the macro bottom of the current cycle.

At the same time, @caprioleio points out that the value of assets locked in LN reaches $150 million today. These are previously unobserved peaks.

In addition, looking at the on-chain data and LN capacity, we see that it peaked in Q2 2023. After a small correction, it is back to record levels today.

Moreover, the chart clearly shows that the decline in Bitcoin price was inversely correlated with the increase in LN capacity throughout the 2022 bear market (red and green arrows).

BTC price drop vs LN capacity increase
BTC price drop vs LN capacity increase / Source: Glassnode

BTC Adoption Reaches Unprecedented Heights

Finally, the last reason mentioned by the analyst for why this Bitcoin cycle is different from the others is the global adoption of cryptocurrencies. @caprioleio gives the example of a burger at McDonald’s that can be bought with BTC, but there are many more such cases.

During the bull market of the previous cycle, the perfect example remains Elon Musk’s Tesla, which began accepting BTC as payment for its cars.

However, over time – and under the excuse of caring about the environment – the company withdrew this option. Despite that, this one of the world’s largest corporations has blazed a trail for other companies that are today opening up more and more widely to virtual currencies.

Here are some examples of industries and companies that today accept payments in BTC:

  • Online retail: Some online stores and shopping platforms accept payment in Bitcoin. Examples include Overstock, Shopify (via a payment gateway), and various online stores specializing in hardware, electronics, and clothing.
  • Gaming and entertainment: The gaming industry and entertainment platforms offer Bitcoin payment options. Examples include Microsoft (through its Xbox service), Steam, and various online gaming sites.
  • Travel and reservations: Some companies in the travel industry accept payment in Bitcoin for airline tickets, hotel reservations, and other travel-related services.
  • Hosting and technology services: Hosting providers, VPN providers, and hardware service companies allow payment in Bitcoin.
  • Restaurants and eating venues: Although not common, some restaurants and bars accept payment in Bitcoin.
  • Financial services: Some companies in the financial sector, such as some currency exchange offices, offer the ability to buy or sell Bitcoins.
  • Online education: Platforms offering online courses may allow payment in Bitcoin for access to educational materials.

For BeInCrypto’s latest crypto market analysis, click here.

Top crypto platforms in the US | March 2024

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Jakub Dziadkowiec
PhD and an assistant professor at an international university in Lublin, Poland. Spent 10 years studying philosophy of nature and sport science. An author of 4 books and two dozens of scientific articles. Now, he is using his mind for the benefits of the cryptocommunity. Technical analysis enthusiast, Bitcoin warrior, and a strong supporter of the idea of decentralization. Duc in altum!
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