Is the Bitcoin Supercycle dead?

• Bitcoin price faces increased volatility, dropping below the $31,000 level.
• The supercycle thesis fades in the background as BTC retreats in a risk-off environment.
• Claims of BTC being a hedge against inflation are put to test in the current market scenario.

Bitcoin sell-off ensues, traders are eyeing the current price action. The digital asset may be set up for its lowest close in 2021, following today’s decline. The broader environment is seeing investors lose confidence. If we were in a Bitcoin supercycle, then its end could bring on a market crash. 

Bitcoin price crash likely brought on by the end of the Bitcoin supercycle

A supercycle generally refers to a decade-long bull run of commodities, however, financial analysts have applied the term to Bitcoin. Supercycles are synonyms of increasing price action with a positive feedback loop. A combination of investor confidence and a confirmation bias drive prices higher. 

This narrative is similar to the series of events that led to Bitcoin price to hit its peak of $64,863 in mid-April. The bull run that started in 2020 can be likened to a supercycle, which appears to be edging closer to an end. Nonetheless, the end of the Bitcoin supercycle is characterized by a dramatic price crash. 

The current risk-off environment has caught traders with their guard up for fear of slow growth in the second half of 2021. Emphasizing the importance of confidence in traders for Bitcoin price growth, Keith Lerner, chief market strategist at Trust Advisory Services said, 

Investing in these cryptocurrencies is based on confidence and liquidity, and as you have a little bit less confidence, you just have a more challenging short-term environment for the cryptocurrencies. 

Crypto investors have long believed that Bitcoin is a hedge against inflation. A month before hitting its peak price, BTC strengthened this narrative by protecting holders from a weakening US dollar. 

Inflation concerns reversed the impact and Bitcoin’s price was slashed in half soon after hitting an all-time high. This coincides with the time when most analysts predicted that Bitcoin would become increasingly valuable. Instead, the flagship cryptocurrency dropped by 50% against the US dollar. 

Hedge against inflation faces externalities in an uncertain macro environment 

The Bitcoin network has proved its resilience in the face of ‘the Great Mining shift’ from China to North America. More than 40% of BTC miners have pulled the plug. Still, the network continues to survive the regulatory crackdown and scrutiny and offered a hedge against inflation to traders for the most part of the past decade. 

The growing uncertainty of the macro environment has negatively impacted Bitcoin price, but crypto Twitter refuses to let the argument rest and @BTC_Archive has stated that Bitcoin bought at earlier price levels is a hedge against the current inflation, thus supporting the narrative. 

All in all, the Bitcoin supercycle may not be dead if confidence increases in the long term. 

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