Potential variables in the Bitcoin halving pattern

Source: Daoshuo Blockchain

In the comments of our articles, readers often ask whether the four-year bull-bear cycle of Bitcoin will be broken?

In this regard, I think there are two references:

One is the price fluctuation law of gold, and the other is the original four-year cycle of Bitcoin itself.

Why use gold as a reference?

Because the characteristics of Bitcoin as "digital gold" are becoming more and more obvious.

But if we refer to gold, there is a big difference between the two-------------The law of Bitcoin's output halving every four years is not possessed by gold, so I feel that Bitcoin's price trend is unlikely to be like gold.

The remaining reference is its own halving cycle. In this regard, past experience seems to have been repeating this law. But I always feel that this law seems to have no theoretical basis, so I gradually think that this law may be broken in the future.

Even so, I am not sure about this.

In fact, not only for Bitcoin, but also for various assets (such as stocks), I have been wondering whether they have quantifiable bull-bear cycles?

This year, while reading the books of Mr. Buffett and Mr. Munger, one of their views has been deeply engraved in my mind:

They will buy assets that are seriously undervalued but valuable. Because they believe that the market will one day pull the seriously undervalued prices back to a position that is more in line with the value.

I often share this view in my articles.

But every time I read the two old gentlemen expounding this view, I always have a question:

How long will this "one day" be?

In the book of another senior master, Mr. Fisher, his view is not to guess how long this "one day" will be, but as long as he thinks the price is undervalued or the stock still has great potential, he will keep it in his hands.

The fact that he has held several stocks for decades reflects his thinking.

However, this still does not answer the question in my mind, and I still hope to find a quantitative answer.

Fortunately, I recently read the answer given by my senior Duan Yongping to this question.

He said the following, which roughly means:

As for how long it takes for the price to return to value, someone told him (Duan Yongping) that Buffett once said it was 4 years, and he (Buffett) had never seen it take more than 4 years. In his (Duan Yongping's) experience, it has never taken more than 3 years. He (Duan Yongping) believes that a valuable stock will reflect its actual value in less than 3 years, while companies with big problems will return to their actual value in 3-4 years.

This passage gives a very clear answer.

According to my understanding of this passage:

Duan Yongping believes that when the price of a good stock is seriously undervalued, the stock price will rise to close to its value in no more than 3-4 years; when the price of a bad stock is seriously overvalued, its price will be beaten back to its original shape in no more than 3-4 years.

As an experienced senior investor, this answer is worthy of our high attention and reference.

"Stones from other mountains can be used to polish jade"--------When I saw this passage, I immediately thought about whether this law is also worth observing, referring to and learning from for crypto assets?

I thought about it carefully. If we divide crypto assets into two categories: one is pure value storage assets like Bitcoin, and the other is assets with use value and service value like Ethereum, then this law is worth noting for the second category.

Why?

Because I believe that in the future, crypto projects will definitely develop in the direction of providing real value and services, so project tokens will definitely be increasingly empowered by the value and services provided by the projects (although this is still very lacking today).

This indicates that project tokens will have a trend of stockization.

So whether this stock law summarized by Mr. Duan Yongping is applicable to the second type of crypto assets is worth observing.

So does this law also apply to the first type of assets such as Bitcoin?

I think it is also very valuable for reference, because in the future it is very likely that the rise and fall of Bitcoin's price will be increasingly driven by the entire crypto ecosystem.

And for the entire crypto ecosystem, more and more assets will be of the first category in the future.

That is to say, every time a Bitcoin halving occurs, if the overall price of crypto assets is seriously overvalued, we can observe whether their prices will fall back in no more than 3-4 years; and when their prices fall back and become seriously undervalued, we can observe whether their prices will rise in no more than 3-4 years (that is, in the next halving cycle).

Therefore, in the next market (until next year), if the price of Bitcoin is seriously overvalued, then I estimate that the four-year cycle will continue at least once more.