Lynn Alden: Bitcoin’s 4-year cycle is evolving, retail participation remains constrained, and financial integration is essential for global adoption

Important points

• The traditional four-year Bitcoin cycle has evolved, and the cycle still exists, but it’s not as predictable.
• The main reason for Bitcoin’s downturn is the lack of individual participation despite institutional access.
• The current bear market may be shorter than expected, which could impact your investment strategy.
• Long-term Bitcoin holders are less likely to sell during economic downturns, which affects price stability.
• A record number of Bitcoins have remained on-chain without being moved for five years, indicating strong holding behavior.
• Stories that early adopters of Bitcoin sold en masse are exaggerated and lack evidence.
• Integration into the financial system is essential for Bitcoin to become a global reserve asset.
• Bitcoin is still perceived as a risk-on asset and influences market movements.
• Lack of retail demand is the central issue in Bitcoin’s current cycle.
• Bitcoin and cryptocurrencies are competing with precious metals like silver for investor attention.
• The market capitalization of stablecoins has increased significantly and is expected to double in the near future.
• Economic conditions in countries with high inflation rates increase interest in Bitcoin as a store of value.

Guest introduction

Lyn Alden serves on the Board of Directors of Bakkt Holdings, Inc. (NYSE: BKKT), a digital asset infrastructure company focused on Bitcoin, stablecoins, and tokenization. She is the founder of Lyn Alden Investment Strategy, general partner of Ego Death Capital, and author of Broken Money: Why Our Financial System is Failing Us and How We Can Make it Better. Her macroeconomic analysis has appeared in the Wall Street Journal, Forbes, and Bloomberg.

Evolution of the Bitcoin market cycle

• “Bitcoin’s 4-year cycle is no longer a law of nature, but the cycle still exists” – Lynn Alden
• Bitcoin’s historical cycle has evolved due to changing market dynamics.
• Despite institutional access, retail participation has not returned to previous levels.
• “This time it played out very differently and felt quieter for the simple reason that retail participation never fully returned.” – Lynn Alden
• The current bear market may be shorter than most expect.
• “Why this bear market is shorter than many expected” – Lynn Alden
• The calm nature of previous bull markets suggests that the bear market will be shorter.
• “I don’t expect the bear market to last this long…mainly because the first reason is that the bull market itself wasn’t very strong.” – Lynn Alden
• Long-term holders are less likely to sell during economic downturns, which affects price movements.
• “Basically, I think once long-term owners become exhaust sellers, they won’t sell anymore. I think that will be the catalyst for the next cycle.” – Lynn Alden

The role of institutional investors and retailer participation

• Retail participation has not fully returned, impacting Bitcoin’s performance.
• “This time it played out very differently and felt quieter for the simple reason that retail participation never fully returned.” – Lynn Alden
• Although institutional access to Bitcoin is increasing, retail demand remains low.
• The core problem with Bitcoin’s lack of retail demand this cycle is essentially a lack of topline demand.
• “The fundamental problem is that there hasn’t been a lot of retail demand this cycle, and almost all the demand has been limited to businesses and institutions…” – Lynn Alden
• The main reason for Bitcoin’s downturn is due to a lack of retail participation.
• “Lack of upstream demand currently limits Bitcoin price movement despite bullish news” – Lynn Alden
• Long-term holders are less likely to sell during market downturns, which affects price movements.
• “Basically, I think once long-term owners become exhaust sellers, they won’t sell anymore. I think that will be the catalyst for the next cycle.” – Lynn Alden

Integrating Bitcoin into the financial system

• For Bitcoin to become a global reserve asset, its integration into the financial system is necessary.
• “It was never going to happen if we got around it…It took Wall Street and politics and government participation to get big enough to even become a global reserve asset.” – Lynn Alden
• Integration with the traditional financial system is critical to Bitcoin’s growth.
• Despite its unique characteristics, Bitcoin is still treated as a risk-on asset.
• “It’s still being treated like a risk to assets…I think that’s going to continue for quite a while.” – Lynn Alden
• Stories about Bitcoin early adopters selling in large quantities are exaggerated and nonsense.
• “I think it’s a stretch to say that the OG is selling a lot even though it’s the same every cycle…I think this is one of the most nonsensical talking points we have.” – Lynn Alden
• Bitcoin is decentralized and cannot be frozen, making it a better savings option compared to stablecoins.
• “Bitcoin…is actually decentralized…you can’t freeze it…you can’t devalue it” – Lynn Alden

Competitive landscape: Bitcoin vs. precious metals

• Bitcoin and broader cryptocurrencies are competing with precious metals such as silver for investor attention.
• “I think Bitcoin and broader cryptocurrencies have kind of made inroads into the silver kind of monitor use case…I think they’re competing for similar mindshare.” – Lynn Alden
• The strong performance of precious metals has diverted attention away from crypto trading.
• “I think the strong run in precious metals was a factor, along with the AI ​​prediction market…Even if they’re not using Bitcoin for such a significant use…they look around and say, well, there’s a ton of assets.” – Lynn Alden
• Bitcoin serves as a volatile, liquid store of value that is accessible worldwide.
• “Bitcoin is a globally accessible, liquid store of value that fluctuates in value, so it’s one option they can invest in after they say, ‘I want to diversify beyond this.’ ” – Lynn Alden
• Economic conditions in countries with high inflation rates increase interest in Bitcoin as a store of value.
• “For example, we’ve been seeing this for a long time in Egypt… They want to eventually do away with the in-store price spec, but those locations will probably still be gold-inclined.” – Lynn Alden

The future of stablecoins and Bitcoin

• Stablecoins act as checking accounts and Bitcoin acts as savings accounts.
• “I think stablecoins are basically like checking accounts, whereas I think Bitcoin is more like a savings account.” – Lynn Alden
• The market capitalization of stablecoins has doubled and is expected to continue to grow.
• “I think the market cap will be double that of stablecoins, and it will probably continue to go from there.” – Lynn Alden
• Bitcoin is decentralized and cannot be frozen, making it a better savings option compared to stablecoins.
• “Bitcoin…is actually decentralized…you can’t freeze it…you can’t devalue it” – Lynn Alden
• Bitcoin price volatility is currently limited due to a lack of upstream demand.
• “The key limiter is… some kind of bottleneck that existed in previous cycles that has now largely been resolved, and instead the problem is just a lack of demand upstream from there.” – Lynn Alden

Economic situation and the spread of Bitcoin

• Countries with currency issues and technology savvy are increasingly interested in Bitcoin and cryptocurrencies.
• “If you look at Chain Analytics, you’ll see that the top 20 countries are listed by various metrics of how involved they are with Bitcoin and cryptocurrencies, and typically one has some currency issues and two is also pretty tech-savvy.” – Lynn Alden
• The economy is likely to remain sluggish for the time being.
• “Fundamentally, I think we’ve been moving in a lukewarm direction for the foreseeable future.” – Lynn Alden
• Budget deficits remain above average due to limited options for tax increases.
• “One of the bottlenecks in reducing the deficit is that you can’t raise taxes through Congress, but Congress has been able to raise basic taxes through emergency authorization.” – Lynn Alden
• The current economic environment is characterized by slow growth in the money supply and above-average deficits.
• “I think the base case is that we’re on a more moderate path at the moment, with moderate above-average deficit growth in the money supply, which is accelerating it.” – Lynn Alden

The role of long-term holders in Bitcoin market dynamics

• Long-term holders are less likely to sell during market downturns, which affects price movements.
• “Basically, I think once long-term owners become exhaust sellers, they won’t sell anymore. I think that will be the catalyst for the next cycle.” – Lynn Alden
• The number of Bitcoins that have not moved on-chain in five years is a record.
• “We currently have a record number of coins that have not moved on chain for five years” – Lynn Alden
• Stories about Bitcoin early adopters selling in large quantities are exaggerated and nonsense.
• “I think it’s a stretch to say that the OG is selling a lot even though it’s the same every cycle…I think this is one of the most nonsensical talking points we have.” – Lynn Alden
• Bitcoin may experience a period of decline before it begins to rise again in response to bids.
• “Fundamentally, I think this is the catalyst for Bitcoin’s next cycle. It gets held in very strong hands, it dies and is forgotten, and then it stops falling for no particular reason, and then it builds up positive price action, and that’s the story.” – Lynn Alden

The impact of economic narratives on market perceptions

• Despite the panic and fear reflected in headlines and social media, the world is not coming to an end.
• “I say the world isn’t coming to an end, but I hope you open Twitter and see that it looks like the world is coming to an end.” – Lynn Alden
• The current economic environment is characterized by slow growth in the money supply and above-average deficits.
• “I think the base case is that we’re on a more moderate path at the moment, with moderate above-average deficit growth in the money supply, which is accelerating it.” – Lynn Alden
• Budget deficits remain above average due to limited options for tax increases.
• “One of the bottlenecks in reducing the deficit is that you can’t raise taxes through Congress, but Congress has been able to raise basic taxes through emergency authorization.” – Lynn Alden
• The economy is likely to remain sluggish for the time being.
• “Fundamentally, I think we’ve been moving in a lukewarm direction for the foreseeable future.” – Lynn Alden