BTC Cycle Extended?

22 May 2020 by rate3

A couple of days ago 'Andreessen Horowitz' - one of the first and most renowned institutional investor in crypto space - published on its site a report named "The Crypto Price-Innovation Cycle".

Extract: "There have been three cycles so far. The first peaked in 2011, the second in 2013, and the third in 2017."

It shows that since 2011 compound annual growth rates (CAGR) in four interrelated sphere of activities (BTC price, developers works, startups growth, media hype) are, correspondingly: 196.4% (BTC); 74.4% (devs); 53.9% (startups); 207.5% (media).

Authors indirectly allege that the fourth cycle, which started in October 2019 when BTC reached its 'bottom' of ~$6500 (it then, of course, plunged under $4000 in 2020), will be culminated in 2021 by another all-times-high (AH doesn't reveal its future price mark, however) followed by the fourth crypto-winter till 2023, after which this cycle will repeat itself on the new price levels.

Extract: "These cycles appear chaotic but have an underlying order, roughly characterized as 1) the price of Bitcoin and other crypto assets goes up, 2) leading to new interest and social media activity, 3) leading to more people getting involved, contributing new ideas and code, 4) leading to projects and startups getting created, 5) leading to product launches that inspire more people, eventually culminating in the next cycle."

However, as we can see showed on AH's own graph, the fourth cycle was started from the decreasing levels of both devs and startups activities, which is not what happened at the start of two previous cycles. It demonstrates that 3d cycle is more extended than authors had anticipated, which was confirmed in March 2020 when BTC dipped below $3,900 on some exchanges.

Consequently, AH timing is now skewed, which degrades the predictive value of this model. Still, that report deserves our attention due to its clarity and briefness.