Rough weekend, but nothing unexpected. Let’s dive into crypto’s four year cycle and why we can expect these crashes along the way.
Show Notes
Gerbz: What's up, crypto crew? This weekend, crypto crashed a little bit, actually. And for the first time in a long time. And, you know, the news will attribute it to like, global warfare or some doom and gloom shit. But the reality is Bitcoin's been on a tear, man. It's been on a run. I think we're up like almost 200 percent in the past six months. And so, it's just time to shake out the weak hands.
And weak hands, we're talking about traders. We're talking about people trying to extract quick value out of the market as opposed to diamond hands, which are people who are in it for the long run, and they're here to hold. And, you know, being a trader, being in it for the short term, it's a fool's game.
You're not going to win at that. You're not going to beat the bots that are out there doing this in a high frequency and who have sophisticated algorithms for extracting that tiny value. What you want to do is buy and hold. The market knows that these bots and these systems are in there and every once in a while it steps in and it shakes them out.
And that's what we saw this weekend, but you know, why did it happen right now? You know, $69K is a very important number on the Bitcoin chart. It's the top of the previous cycle's high, Bitcoin's previous all time high and that creates what we call resistance. This is a level that makes it difficult for the price to get above.
Above this resistance is where price discovery happens. And price discovery is where Bitcoin discovers how much it's worth in a new way. It's the price that it's never reached before. It's never been above $69K, so it's going to continue marching into price discovery. It's going to hit 70, 80, 100, 125, 250, 500, who knows? No one knows where it's going. Maybe in a future episode, we'll talk about how high it's going to go, but at each of these levels we're going to kind of have these crashes along the way.
And it's not going to be because of the election or because of some war or a new country bans crypto forever. It might seem like that and the headlines might say that, but this is just what we call FUD. This is fear, uncertainty, and doubt.
Because everyone's, they know they've just been on this big run. They know their portfolio has grown so much over these last few months and they're afraid of losing it. And then boom, any headline that hits, it doesn't matter what it is, is going to cause this crash. And some of these crashes are more extreme than other ones.
And I've always wondered about this too, like. Why do these kind of extreme crashes happen in crypto, a flash crash? And I learned most about it kind of in the last cycle. And what I learned is that in crypto, there's a lot of leverage being used, and leverage is when people borrow against their crypto to buy more crypto.
And so in Bitcoin, we didn't really have as much of a flash crash. But man, did we see it in ETH, right? And what happens is this flash crash, it causes a wick in the chart. If you're looking at a chart and you have it in candle mode, you'll see this long line, like in the middle will be either green or red, like a bar in the middle, and then the bottom will have what's called a wick.
And this wick is like, how low the price went. And it could have gone there for only a second, like it could have gone there for a millisecond, and it probably did only for a few minutes in this case. And the reason that this happens is because all these people who are over leveraged, they're forced to sell their asset because they're borrowing against it.
So for example, like if you look at the Ethereum chart this weekend, it looks like there was probably a lot of leverage and liquidations at the $3,000 level, which if Ethereum went below $3000, whoever they were using to borrow, they're forced to sell their collateral. They're forced to sell their Ethereum at $3000, at $2800. And that causes the price to sort of flash crash down. And, you know, these flash crashes are the biggest opportunity. The reason they pop back up so quickly is because smart traders have buy orders in along that liquidation range.
And you see, like it popped at kind of $2,500. It's not surprising to me that that's also kind of a support level when you draw a line on the Ethereum chart. That's a support level for Ethereum. It's also around the 50 day moving average. Not surprising that it sort of just flash crash close to that 50 day moving average.
And so people had buy orders in at $2,900, $2,800, $2,700, $2,600, $2,500. they weren't sitting around this weekend with their finger on the trigger, ready to buy ETH. If they're smart, and if you were smart, you already had buy orders in. If you wanted to buy more ETH, you don't buy it the day you think of it, the day you're looking at your computer. You put those buy orders in above previous support levels.
And then you just wait, man. And it's a patience game. The trading part of longterm is really difficult, right? Cause we're not trading like actively we're trading because we have to buy in and get out of positions over a longterm.
So even though you're a longterm investor, you're, you still have these spurts where you have to trade. And the way to do it is to be very patient, put in limit orders, wait for these crashes to come in so you can scoop up cheap coins when it happens.
Now, this may have been the first kind of flash crash of this cycle, but it's definitely not going to be the last one. In the 2017 cycle, and I use that as an example, just cause it's so clear, we see it so clearly. Bitcoin crashed 20 to 40%, eight times over the course of that cycle. It went up 4000 percent in the year long bull run, but eight times it crashed, like 20 to 40%.
And every one of those times was really, really scary, especially for people who'd just gone up. They doubled their money. They tripled their money. They hadn't taken any money off the table. They hadn't sold anything. And they're afraid. And then boom, a headline hits. It doesn't matter what it is. You know, Trump bans Bitcoin.
Boom, it crashes. And everyone freaks out and that's the weak hands, right? And all the smart people use that crash to buy more. This is going to happen over and over again throughout the course of this bull run, which is going to happen over the course of the next year to year and a half. We're going to be on this like boom and crash cycle as we grow into price discovery and reach the top of wherever this cycle is going.
And so I keep mentioning the cycle, right? The cycle. All I really talk about and think about all the time is the cycle, and that confuses some people. Let's talk about the cycle a little bit. When I say cycle I'm talking about crypto's four year cycle. It's this bull and bear mode that it goes into.
And you, if you zoom out on the chart, you see it very clearly. The tops of each bull market are almost exactly to the month, four years apart. And this isn't like a rough thing. There's a very specific exact reason why this happens. And it happens because of Bitcoin.
You know, Bitcoin was the first crypto. It sort of kicked off this cyclical nature of the crypto markets and Bitcoin has programmed in since day one to have a halving event. And so, and in fact, the halving is coming next week or later this week, which is just sort of random that I'm talking about it right now, but it's a very important thing to understand.
And so what happens is when Bitcoin was first launched, 50 new Bitcoin were issued at every block. You know, there was zero Bitcoin day one and then every block, which happens every 10 minutes, 50 new Bitcoin were issued to the miner that mined that block. And so fast forward to, you know, 12 years later. We've issued a lot of Bitcoin.
There's over 19 and a half million of the 21 million Bitcoin have been issued. And right now, today, as I speak, six and a quarter Bitcoin are issued every 10 minutes in every block. And next week after the having, we're going to get cut in half to three and one eighth Bitcoin are going to start being issued every block.
And so what does this mean, right? What this means is that currently today, $60 million worth of new Bitcoin, which is like 900 Bitcoin per day are issued every day, $60 million every single day. And so if there's not $60 million worth of buying demand every day, the Bitcoin price will go down as new Bitcoins are being released.
But there is about $60 million. In fact, it seems like there is about $60 million of demand because we've been riding sideways for a few months now at the $69K level. And so what happens is post halving that supply that's being issued gets cut in half to $30 million worth of Bitcoin per day.
But that demand, it's not going to go away. That $60 million of demand doesn't go away. So the halving creates a bit of a supply shock in the market. And it doesn't happen on the day of the halving. In fact, you know, everyone's like expecting and waiting for the halving to come and we're all watching this countdown to the halving, and it's a total non-event.
Like, nothing happens, no one notices. If you dig into the data on a block explorer, you'll see that like, you know, the amount of new Bitcoin being issued got cut in half, but nothing happens in the markets. You know, Satoshi doesn't like pop out of his hole somewhere and say surprise. Nothing happens.
In fact, I would suspect the price to dump. Since we dumped this weekend, like, just leading into the halving that might've actually been in it already. I was kind of expecting this non-event halving to kind of be a sell the news event like we've seen in the past.
But anyway. this sort of creates a supply shock. This halving creates a supply shock. The moment of the halving only $30M worth of Bitcoin are going to be generated every day instead of 60, but the demand doesn't go anywhere. So now instead of buying this new $30M worth of Bitcoin, they've got to buy from people who want to sell. And no one wants to sell at the price it is right now, they want to sell at a higher price. And so this supply shock, it kicks Bitcoin into a bull market.
And historically, you know, we crack into this bull market about six months after the halving, maybe we're going to dump at the moment of the halving, which is going to happen this week, we'll kind of float around for a little bit, six months from now we'll break into price discovery. We'll break above $69K, then we'll come down and we'll retest $69K again, just to be sure we're not still not ready to go above it, we'll test it. We'll bounce off of it and it's off to the races. And this usually happens within six months of the halving.
So we're talking like, the end of this year, the end of 2024. We're not talking about the top or like all time high of all time, like at the end of this year. We're talking just breaking above this kind of $70K range that we've been consolidating in, end of this year. And then the high, the top of the market that doesn't happen for another year historically in the last two cycles, especially.
So when now we're talking like the end of like, 2025. Q4 2025, that'll be the top. We've got a long way to go and we're going to have a lot of these little crashes along the way. And so being prepared for these crashes, knowing they're coming, preparing your emotions for these crashes, maybe even putting in buy orders if you plan on buying more along the way, that's how you play this cycle. That's how you play these crashes. That's how you survive through this doom and gloom that's coming, is just knowing it's coming is half the battle, right? Being prepared for it. You're going to be ready.
So how high will Bitcoin go this cycle? How high will Ethereum go this cycle? What's the top going to be? You know, that's the trillion dollar question, right? That's what everyone wants to know. And I just had calls with a bunch of the BitLift community over the past few weeks. Like, I had one on one calls with people just to talk cycle, talk strategy, talk financial planning, see where everyone's head's at, help them kind of figure out what their plan is going into this bull market.
And we talked, so cycle was the number one topic that came up over and over and over again. So I just like, I plucked all those cycle conversations out of my conversations with everyone. I edited them together so you can get a little more context, see a little bit more about where my head's at when I talk cycle.
And hopefully you enjoy hearing more about the cycle. And if you have any questions about the cycle you know where to find me. So enjoy some conversations about the cycle with the BitLift community.
This has happened on most of the calls we've had, right? I, and this thing keeps coming up is that. Most people, their first cycle, they just like buy the top and they lose their money. That's like cycle number one.
Cycle two is they're ready and they ride it up and they ride it all the way down. Cycle three, they crush it. I mean, that's where you learn. That's where you earn your stripes. And like, you're like, okay, I see what the potential of this market is now. And you feel that energy that it can have, you know?
I mean, probably what, everything that's happened so far is almost guaranteed to not happen again, except it'll be something like it.
Felipe: And there must be some psychology going on because it's a collective, it's what everybody, it's everybody's expectations mixed together that makes these cycles, right? So it's whatever most people or most, institutional investors or whoever are expecting is going to dictate.
Gerbz: Each, cycle is an opportunity to level up in life, like to reach the next level. And, you can't skip levels. That, this is a thing that a lot of people try to do is they try, they think that, you know, they're going to buy some, like meme coin and just go from like zero to a multimillionaire.
And you, that's not how no one I've ever known, you know, you read about in the news, but no one you've ever known has actually successfully done that. You level up one step at a time. You can accelerate, you can be good at playing the game, but you can't skip a level. And I think that's really important. I think it's a good way to approach crypto is that each four years is a level of the game and you can set your goal for that cycle.
And you know, if something, if magic happens, lock it in. I mean, it's easier said than done, but most likely you're going to kind of reach that level that makes sense, and then if you don't lock that level in, you might ride it all the way down, trying to skip that level. And it's important to not try. Yeah.
TJ: That's why I got this Boom4 planner and like, okay, well, this is the number that, I want. So there you go.
Gerbz: Yeah.
Buy it, but also have a plan to sell and don't get greedy. That's what happened to me last cycle. Don't try to day trade your cryptos cause it just doesn't work.
Gerbz: It doesn't work, I know. It's unfortunate, but there's a reason people are professional traders, right?
I feel like my emotions sort of go with the cycle of crypto. So things are good because prices are up, I guess? I don't know.
Jacques: I mean, at the same time, let's say you got in at the first cycle, and you just bought Bitcoin, and you never sold, you're just like, oh, I'm just gonna ride it, you know? And it never sold until now, you would be really much in the plus.
What is a supercycle? Is that when it's, when it would happen this year, or what would that look like?
Gerbz: So the term super cycle, it refers to this idea that maybe we're not going to have an insane boom and then bust every four years. The super cycle theory, and it became more popular in the last cycle, was that maybe now that there's lots of big institutional money coming in that they're not going to allow almost these really steep drops to occur.
Maybe we'll sort of have these rounded tops and then kind of rounded bottoms also. And we'll just kind of keep snaking up into the right instead of having this every four year, very big boom, very big drop. Which is what we've experienced.
So that's the super cycle theory is that instead of four small cycles, we're just gonna have one long one from now on.
Now that was disproven last cycle, and the reason this idea pops up and something like it will pop up every cycle when we're somewhere near the top, everyone wants to think that we're going to keep going up forever. Because no one, no one wants to sell. You know, we all should probably sell, at least after we've had this crazy boom and we've had some of our goals achievable and our portfolio. We see it there, and we don't capture it.
We start to make up reasons why we shouldn't sell. So the super cycle is another one of these dumb reasons that came up. Every cycle we'll have these reasons to never sell. The super cycle is one of those reasons. Don't believe it. Don't believe it until there has been a cycle that we didn't drop. Until I can see one, like in my rear view mirror, then maybe I'll believe a super cycle is possible. But for now we're going to have big booms and we're going to have big busts also.
Jacques: Yeah.
Gerbz: Do you have a, goal for this cycle? Like a monetary goal? Are you going to try to like sell a certain chunk at a certain time or anything?
Brett: I don't know. Like, I don't really ever want to sell any Bitcoin, but...
Gerbz: Mm hmm.
Brett: If it goes completely berserk, I might sell a little bit. De-risk if, you know, we hit another multi year bear cycle.
Cause I mean, I don't know what's going to happen. I've been through this game a long time and there, you know, there's many times I've watched my portfolio go up to like, you know, silly numbers that I've never seen in my life.
When I just kind of like shake my head and I just don't even do anything because I know that there's a bigger future down the road.
Gerbz: But also couldn't you like sell at that moment and then buy back when you know this winter is coming?
Brett: I think I can now, but in the past I was, you know, I never know, you know, now it's like, no, I think I have a better picture of how this works.
Gerbz: So what's your final message for someone who they're getting into crypto right now. They've sort of been seeing this cycle thing happening, but they don't understand it. They know there's still an opportunity here. Bitcoin's not going anywhere. They want to like, start thinking in sats. What would you say to them right now?
Brett: I think you should start putting some of, you know, if you're working a job and you have a paycheck, you should start putting a small percentage of your, you know, your income into Bitcoin. A very small percentage, you know, 5%, 10%, whatever, you know, some sort of spare cash that you would have spent on like video games and booze or something like that.
Take a chunk a little bit out of that. Buy a couple less beers every week and put it into Bitcoin and start having this like long term savings account, basically. Don't spend it. Don't sell it. Don't worry about the price. And use that to get a little skin in the game and then start reading about it.
Joel: To have a better idea of the cycles. I know I will not be like that precise to identify the cycles, but I will be able to identify the clues.
Gerbz: There's an event in April called the Bitcoin halving is coming up. And what that means is like, I told you there will only ever be 21 million bitcoins in existence. The amount of Bitcoins in existence is slowly growing, until we reach 21 million. And every four years the amount that gets issued gets cut in half until we reach 21 million. And typically that's called the halving event, the Bitcoin halving.
And typically when that happens, that's what sort of kicks off and starts the next bull market in crypto.
Joel: I mean history is a cycle so everything repeats itself in one way or another So eventually that should happen.
Ferenc: So in the first cycle I just bought some just to see what this is and it went really big and and I didn't sell and I'm like, okay. I Thought that was it. I thought this is it, never actually going to recover from that but I was holding on to it.
And, so then we get to the second cycle and I'm like trying to look at the negatives. Like people who are talking about the negatives and maybe against the whole thing. And this is always going to crash and it's thin air and whatever. A weird thing happens. Obviously I didn't sell, yeah.
Gerbz: I think part of that is like, the cycle, right? Like I think people, when people are super bullish and prices are up, everyone's very euphoric and has like this vision of the future and how it's going so well. And then when prices are down, everyone's hurting they think it's over. Or that this is clearly not going to work because of, look at all the problems that we have and what it led to.
Timmy: Yeah, it's true People become a lot more tribal when prices are down. I've noticed that.
Gerbz: What happens is every cycle we do have some sort of catastrophic crash. And I think it's because we always have such a euphoric manic run up, right?
So, the reason for the crash, it'll keep changing. I've always heard and like I kind of repeat to myself is that, like the cycles, they're not going to repeat but they'll always rhyme. The same exact thing isn't going to happen, obviously. are we going to have a manic run up and then some sort of explosion? I think so.
Timmy: Yeah, that answers my question. One other thought that I had is, so a lot of people believe in the super cycle, which I understand is like, every time people say it's like, this is the last cycle, like bitcoin will stay this high. But obviously there has to be some point where the four year cycles are like so numbed that maybe it goes 20 percent from its all time high or 10 percent or something.
How do you think about Bitcoin cycles being numbed over time as the industry becomes established?
Gerbz: I think it's a strong possibility, but I also think it's a strong possibility that most people think that's, what's going to happen. So it's the opposite of what's going to happen. Which, I like that theory.
I mean, I actually have a chart on this where I charted, how numbed each cycle has been since the 2013 cycle, and it has gone down. The multiple of how much Bitcoin has grown each cycle has gone down over time. But maybe that was like, maybe you could basket all that chunk of cycles and basket it under, this was pre Wall Street money.
Cuinn: Are there times in the crypto life cycle where you are paying attention even more than usual to make sure that you're ready to go at a moment's notice?
Gerbz: When the price starts hitting some of my predictions and when my goals start becoming real and when that happens, I am paying more attention to the price. The chaos of the market does start to suck you in because everyone has this, is in this emotional state, and all of social media is going crazy.
Crypto Twitter, we call it is like where everyone's just Tweeting up a storm about crypto stuff and flinging out predictions and and fud, right? Fear, uncertainty and doubt. Like, everyone's afraid. What happens is people get more afraid actually as the price goes up. They get greedy and, uh, bullish, but they also get afraid because they know they're getting into that territory where it's getting risky.
Like, they start to see it hit their goal and they're like, they start setting new, higher goals instead of capturing their goals. And they're doing things that they know they shouldn't be doing. And it causes a lot of drama.