Arthur Hayes, a co-founder of BitMEX, argues that Bitcoin’s conventional four-year price cycle has become ineffective. He posits that the current bull market might extend well beyond expectations, driven by loose monetary policies.

His views contradict widely accepted beliefs in the cryptocurrency space, emphasizing a shift from mechanical timing to a momentum influenced by macroeconomic factors.

Hayes Challenges the Four-Year Cycle Assumption: Liquidity is Key

In a recent article titled “Long Live the King!” on his Substack, Hayes alleges that many traders have improperly applied a strict four-year framework to Bitcoin’s cycles, ignoring changes in the global monetary landscape.

He asserts that historical highs have generally aligned with tighter credit conditions in the USD and yuan, not merely with halving schedules. Hayes believes current economic conditions are distinct enough to alter this trend.

The forward-looking perspective of the crypto entrepreneur includes the U.S. Treasury’s plans to introduce additional Treasury bills, which would indirectly inject significant liquidity into the market by tapping around $2.5 trillion from the Fed’s Reverse Repo program. Furthermore, Hayes mentions that the Federal Reserve has initiated cuts in interest rates despite ongoing inflation concerns, with futures markets anticipating two cuts later this year.

In his critique of those who ardently follow price cycles, Hayes admonishes their neglect of underlying reasons that previously justified the rhythm, stating: “traders wish to apply the pattern … without understanding why it worked in the past.” He maintains that the dynamics of currency supply and borrowing costs, especially in relation to USD and yuan, are the actual driving forces behind market movements.

The market responses have varied. Analysts like Raoul Paul continue to observe signs echoing previous cycle structures, even suggesting potential extensions. Conversely, veteran trader Peter Brandt cautions that diverging from the historical four-year cycle could lead to significant price fluctuations.

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Context, Dissenting Views, and Future Predictions

To fully grasp Hayes’s argument, a look back at Bitcoin’s three full cycles is necessary. From 2009-2013, the momentum was curbed by a contraction in credit both in the U.S. and China.

During the 2013–2017 period, much of the Bitcoin rise can be linked to credit expansion in China rather than merely USD flows. The subsequent slowdown precipitated a downturn.

The era influenced by COVID saw a surge of USD liquidity overshadowing Chinese restrictions, ending when the Fed started tightening monetary policy in late 2021, with BTC reaching its peak in April of that year.

Hayes now posits that the upcoming phase appears different, suggesting that even though China will not drive the growth, its shift away from deflation might support the global credit movements, thereby loosening countermeasures against U.S. liquidity. In his viewpoint, the world is transitioning into a phase where more affordable money and higher supply can foster further growth in Bitcoin.

However, detractors emphasize potential risks such as economic downturns, banking sector stresses, and inflation surges that could disrupt this liquidity-focused perspective.